Blog

Andy Walden, vice president of enterprise research at ICE Mortgage Technology, and CNBC’s Diana Olick join ‘The Exchange’ to discuss the state of mortgage demand, the overall health of housing, and more.

David:
This is the BiggerPockets Podcast show 871. What’s going on, everyone? It’s David Greene, your host of the BiggerPockets Real Estate Podcast, joined today by the data deli himself, Dave Meyer. And when you’ve got Dave and David together, you know what that means. It’s a bigger news podcast. In these shows, we dig into the news, the data, and the economics impacting the real estate industry, so you can use that information to build your wealth.
Dave, welcome to the show.

Dave:
Thank you, David. I appreciate it. I’m excited as always to be here, but today, I’m particularly excited because our guest is one of my all-time favorite guests. His name is Rick Sharga. And if you haven’t heard him on any of our shows before, Rick owns CJ Patrick. It’s a company that focuses on market intelligence, and data, economic research, all specifically for real estate investors. So all the work he and his team do is extremely relevant for the both of us and everyone listening to us. And today, we’re going to dig into some of the research he’s done specifically around foreclosures in the US and what’s going on in that part of the housing market.

David:
And after the interview, make sure you stick around all the way to the end of the show because Dave and I handle a question Seeing Greene style at the end of the podcast about a listener who’s trying to figure out if they should use a HELOC or a cash-out refinance to scale their portfolio. All that and more on today’s epic show. Let’s get to Rick.
Welcome to the show today, Rick. Excited to talk about foreclosures. That’s always a fun topic for real estate investors to get into. But before we talk about where they’re at today, let’s talk a little bit about historical foreclosure activity. What can you share with us?

Rick:
Yeah, thanks for having me on the show. Always good to talk to you guys.
Foreclosures are an unfortunate reality in the mortgage industry. Typically, people do pay their mortgages on time and regularly, but about 1 to 1 1/2 of loans at any point in time are usually in foreclosure. And about 4% of loans are delinquent but not yet in foreclosure. We saw a huge spike back leading into the Great Recession about 10 years ago, where foreclosure rates actually approached about 4% of all loans, which was just remarkably high, and about 12% of loans were delinquent. And a lot of that was because of really bad behavior on the part of the lenders, to be honest with you. And a lot of real estate speculation that was kind of reckless. But historically speaking, you’re looking at about 1 to 1.5% of loans in foreclosure, and that would represent a kind of normal year.

Dave:
I think a lot of real estate investors follow foreclosures really closely because it, one, has implications for housing prices if there’s all of a sudden huge influx of foreclosures that could put downward pressure on prices. But also just because recently, there’s been such a shortage of supply and inventory on the market. I think a lot of people are wondering if foreclosures are going to take up and perhaps increase the amount of homes that are up for sale or up for auction in the case of a foreclosure at any given time. So I’m just curious, Rick. What’s been happening recently, and is there any chance that foreclosures might add to some inventory in the coming year?

Rick:
Let’s unpack a couple of the things that you said there. The interest that I’ve seen from investors in foreclosure properties over the years is purely mathematical. Typically, you can buy a property in some stage of foreclosure for a whole lot less than you can buy a property at full market value. And we can talk about it as we get into our conversation a little bit. But there’re three different stages of properties and distress that people can buy foreclosures during, and the risk and reward varies accordingly.
When COVID hit, we were already in a market where there wasn’t a lot of foreclosure activity. We were probably running at about 60% of normal levels of foreclosure. So a little more than a half a percent of loans were in foreclosure at the time. Then the government put a foreclosure moratorium in place that lasted over two years. So really, about the only properties that were being foreclosed on during that pandemic era were commercial properties or properties that were vacant and abandoned. But if you had a more conventional, traditional loan, even if you were behind on your payments, you were fairly safe.
And then the government also put a mortgage forbearance program in place where basically all you had to do, as a homeowner, excuse me, was call your mortgage servicer, say that your income had been affected by COVID, and you were allowed to skip mortgage payments. And that program lasted for about two years. So we’re coming out of a period where we had virtually nothing going into foreclosure for an extended period of time, resulting in some of the lowest foreclosure activity levels in history. And even today, we’re running at about 60% of the level of activity we saw back in 2019, when, as I mentioned, foreclosures weren’t particularly high to begin with.
We’re also seeing a difference in the stages of foreclosure and the rate we’re seeing compared to pre-pandemic. So if you look at foreclosure starts, that’s the first legal notice a borrower gets that they’re in default on their loan. They’re coming back at about 70 to 80% of pre-pandemic numbers. But if you look at the number of properties being auctioned off in foreclosure sales, they’re still down at about 50% of pre-pandemic levels. And if you look at bank repossessions, which is what happens to properties that don’t sell at those auctions, they’re at about 30% of pre-pandemic levels. So if you’re an investor looking to buy a foreclosure property, the market’s a whole lot different than it was prior to the pandemic and way different than it was going back to the crisis in 2008.

David:
You mentioned there’s three levels of foreclosure. Can you briefly cover what those are, and then we’ll talk about how those are different now compared to where they were in the past?

Rick:
Yeah, sure. That’s a great question. There’s what we call a pre-foreclosure stage, and that’s when the borrower gets that first legal notice of foreclosure. In a state like California or Texas where the foreclosures are done in a non-judicial process, that’s called a notice of default. If you’re in a state like New York, or Florida, or Illinois where it’s a judicial foreclosure process, it’s called a lis pendens filing. So you get that first legal notice, and that starts the gears moving on a foreclosure. There’s a timeline that every state has that goes from that first stage to the second stage, and that’s a notice of sale. That’s when the borrower has kind of exhausted that pre-foreclosure period. And the lenders basically told them that the property is going to be auctioned off either by a courthouse auction or a share of sale on a certain date. So that’s the second stage of foreclosure. And that results in that auction, that share of sale, taking place, where typically a lot of investors will buy those properties.
The properties that fail to sell at those auctions are typically repossessed by the lenders. Those properties are taken back as something the industry refers to as REOs, that stands for real estate owned, because the industry has no creativity whatsoever in naming things. But at that point, the bank or the lender has repossessed the property to basically make it whole for whatever the unpaid loan balance was. And they’ll resell those properties either through a real estate agent or through one of the online auction companies. So those are your three stages of foreclosure.

David:
And so pre-foreclosure would be like a notice of default, and anything else would be included there.

Rick:
Yeah, and what’s really interesting in today’s market, David, is that we’ve seen the percentage of sales of distressed properties shift dramatically from where it was five or 10 years ago. So normally, you see a pretty high percentage of distressed property selling at the auction or selling as lender-owned REO assets. Today, about 65% of distressed property sales are in the pre-foreclosure period. So the homeowner’s getting that first notice of default. And rather than losing everything at a foreclosure auction, they’re selling the property themselves on the open market to avoid losing everything to a foreclosure.

David:
Perfect. So you’ve got pre-foreclosure, which is when you’ve missed payments, you’ve fallen behind, the bank sends you a letter saying, “Hey, you’re in default.” I believe in most states they have to put something in the newspaper. There needs to be some kind of public declaration that the person is going into foreclosure. Funny, I see Dave making a face because that’s weird, right? Why are you putting our business out in the streets like that? But I think the idea was people could say, “Well, I never got that letter.”
So a long time ago, they would post it out there in the community bulletin board or put it in a public space so that the person couldn’t claim that they weren’t notified. That’s what most of the wholesalers or the people that are looking for off-market deals, they’re fishing in that pond. They’re like, “Who’s got a notice of default or an NOD? How do we get ahold of them, because if they have some equity but they’re going to lose the property, let’s buy it first?” You mentioned that, Rick. If that doesn’t work, the bank then says, “Hey, we’re going to sell the house on the courthouse steps in some kind of a public auction and get our money back from the person if it’s a non-recourse loan. If your property sells for less than what you owed, then hey, you’re off the hook.” But if it was a recourse loan, you are still on the hook for whatever was owed after the auction, which sucks because stuff never sells for as much at auction as much as it would sell for on the open market.
And then, if it doesn’t sell on the courthouse steps, then the lender or… What’s usually the case is the bank has to take the property back. It becomes a part of their portfolio. They take title to it, and it’s referred to as REO because it’s looked at as real estate owned on the bank’s books. That’s when a bank would go say to a real estate agent, “Hey, sell this thing. We don’t know what the heck to do with it,” right? Like when you hand a grown single man a baby and he’s like, “I don’t know. What do I do with this thing?” That’s how banks feel about taking properties back. So that’s where you can… You can find those properties on the MLS, but that’s a great explanation because people just throw the word foreclosure around.
And it’s confusing because not everybody understands that a foreclosure that’s listed on the MLS as REO is not going to be something you get a great deal on because all the other buyers see it, versus a foreclosure that you’re buying on the courthouse steps could be a great deal, but you’re going to have to have all cash. You’re not going to get a title check. You’re not going to get inspection, and then a foreclosure… In pre-foreclosure is something you actually probably could get a really good deal on because the person’s motivated to sell it. However, it’s hard to find them. Because you have to find the person that’s got the property. Okay, that’s a great explanation. Thank you for bringing some clarity there to all of our audience.

Dave:
Okay, so now that we understand the three different levels of foreclosure, the question is what does the current foreclosure landscape mean for your real estate investing strategy? We’ll get to that right after the break.

David:
Welcome back. We’re here with Rick Sharga, president and CEO of CJ Patrick. And he’s spelling out his company’s market intel on the state of foreclosures in the United States, as well as what that means for real estate investors.

Dave:
So, Rick, you mentioned that the early stages of the foreclosure process have started to tick up, but sales are not. And that is likely, from my understanding, because people are selling them earlier. Is that a consequence of all of the equity that the average American homeowner has?

Rick:
Yeah, that’s your spot on, Dave. There’s $31 trillion in homeowner equity out there. That’s an all-time record. And when I go out and talk to groups and I point out that there’s a lot of equity, the pushback I usually get is, “Well, yeah, but people in foreclosure don’t have equity.” Well, yes, they do have equity. In fact, according to some research from ATTOM DATA 80% of borrowers in foreclosure have at least 20% equity. I’ve seen some other reports from companies like Black Knight where that percentage is a little lower, but you’re still talking about close to 70%. So if you’re sitting on a 400,000-$500,000 house near 20% equity, that gives you 80,000-$100,000 cushion to work with. It also gives you the potential of losing 80 to $100,000 of equity if that property gets auctioned off in a foreclosure sale because the lender is going to sell it only for the amount still owed on the property, not for all of your full market value.
So intelligent people who have fallen on difficult times financially are leveraging that equity and selling the property off either at or close to full market value. But if you’re a savvy investor if you know how to work with borrowers in that kind of financial distress, you can usually find yourself a property, negotiate a deal that gets you something below full market value, but let that distressed homeowner walk away with some cash in their pocket and get a fresh start.
If you’re a rental property investor, you might have somebody who’s temporarily fallen on hard times recently got a new job, but just can’t catch up on payments. And maybe they become a worthwhile tenant. So you can buy a property with a built-in render right off the bat. So it’s a very different market dynamic than what we saw during the foreclosure crisis of 2008 to 2011, where the right strategy was to wait for the lender to repossess the property and buy an REO because the banks were selling them at fire sale prices just to get them off the books. And your average borrower in foreclosure was way underwater on their loan.
It’s just not the case anymore. In fact, some of the equity numbers would just blow people’s minds if they saw somebody in foreclosure who’s sitting on 70% equity. And there’s a question I do get periodically, which is, with all that equity, how they wind up in foreclosure? And the truth is that having equity doesn’t prevent you from missing payments, and that’s what gets you into foreclosure. So typically, it’s the same old things. It’s job loss, unexpected medical bills, divorce, death in the family, things like that that cause people to miss payments and go into foreclosure, but that equity provides them with a much better chance at a soft landing than what they had with no equity back in the day.

Dave:
Rick, I think that’s so important that the amount of equity that you have in your home and your ability to pay your mortgage are not the same thing. And you can have relative wealth in one area and still have negative cash flow as a household. And so unfortunately, people do fall on hard times even though they have positive equity. And I do want to get to talking about why people have so much positive equity, but I have one question. Someone on our podcast on the market recently, it may have been you, Rick, so please forgive me if I’ve forgotten, was telling me that the banks also now sort of have expanded their playbooks for how they can intervene in these unfortunate circumstances. It seems like back in 2008, they really didn’t know what to do with someone who stopped paying their mortgage. Are they more equipped to handle that now?

Rick:
Well, it was a bit of a perfect storm back in 2008. The banks didn’t have a particularly robust toolkit of ways to help borrowers who wound up in default. And they got overwhelmed with just the sheer volume. Again, we had four times the normal level of foreclosures, and they were all happening at once, and these loans that were just awful, awful loans that were written at the time. So in a lot of cases, there was very little the banks could even do.
So fast-forward 10 years to today, the loan quality of mortgages written over the last decade has been extraordinary, probably the highest quality in history. We’ve had an enormous amount of equity growth. And in the meanwhile, the mortgage servicers have really developed many more processes and tools they can use to help borrowers. In addition to that, we just went through this forbearance program that has been for my money, probably the most successful example of the government and the mortgage industry working together to achieve a positive outcome ever.
8.7 million borrowers took advantage of that forbearance program. There’s probably about 200,000 remaining in the program today. But of that 8.7 million, the people that have exited less than 1% have defaulted on their loans. So it’s just been a remarkable, remarkable success story. And what we’re seeing is the large entities that play in the mortgage space, Fannie Mae, Freddie Mac FHA, have kind of co-opted some of the techniques that we saw used in that forbearance program and are making those available to mortgage servicers to create loan modifications and loss mitigation strategies.
Fannie and Freddie have been instructed to make a similar forbearance program part of their ongoing loss mitigation activity. Ginnie Mae lenders have been given the option of extending the terms of a mortgage from 30 years to 40 years to get the monthly payment down again on distressed loans only not as a new loan.
And the FHA has a program where they can actually remove part of the mortgage loan and tack it onto the back end, so that you don’t owe any payments on maybe 10% of your loan until you either sell the property or refinance the loan at the end of the term, and that lowers their monthly payments.
There’s a lot more creative processes involved today and lost mitigation and loan modifications than what we saw 10 years ago. And candidly, the servicers are reluctant to foreclose on anybody. They’re not absolutely sure. They can’t help salvage because they don’t want the CFPB to come down on them with the wrath of God either. So there’s some motivation from that perspective as well.

David:
That’s a great insight into the history of foreclosures. And I do like that you mentioned the last housing crisis we had around 2010, ’11, ’12. It wasn’t just, “Hey, it’s a bad economy.” It was an absolute collapse of the housing market, which flooded the market with an insane amount of inventory at the same time that people were losing their jobs, and we went into an economic recession. So you had way fewer buyers to buy these properties, and in an outrageous amount of supply that hit the market, which led to an utter collapse of housing prices. And I think a lot of people feel like foreclosure is synonymous with buy it for 30% of what it’s worth, and that’s not the same. And I really love that you pointed that out.
Going into 2024, I think that just from what I see in the market, there’s a good chance that we’re going to have more foreclosures than what we’ve traditionally had. I don’t know it’s going to be an incredible spike like what we saw before. What do you think people should look out for or expect regarding foreclosure activity going into the new year?

Rick:
So I’ll answer that question, but I want to touch on something you said earlier because I think it’s critically important. We really did have a perfect storm back in 2008. We’ve never seen that set of dynamics happen at the same time. And what people don’t realize is right before the market crashed, we had about a 13-month supply of homes available for sale. In a normal market, you’re looking at about a 6-month supply of homes available for sale. In today’s market, you’re looking at about 2 1/2 to 3 months supply. So we’re dealing with an overabundance of inventory back then, right before everything started to go bad at from a lending perspective, and it built on itself. So that combination of more supply than demand plus distressed inventory coming to market really is what cratered home prices. And people were buying properties at 30 cents on the dollar.
Investors actually helped pull up the economy out of a recession by going in and starting to gobble up all that inventory. But last time, that big Great Recession, was the first time that I’ve ever seen where the housing market actually took the economy into a recession. Usually, the housing market helps the economy recover from a recession, but this time, we actually took it in because things were so bad. Not a replay of that at all in 2024. In fact, we ended 2023 with about 0.4% of loans in foreclosure, which again is way lower than normal. To put that in perspective, that means you’re looking at somewhere between 200 and 250,000 homes in some stage of foreclosure. And in a normal market, that number would’ve been more like 500 to 600,000. So just not a lot of activity. What continues to happen is that people get that first notice, and instead of going into hiding and denial, they’re acting quickly and selling off a lot of those properties. So that’s adding a little bit to the for-sale inventory but not really adding to distressed property inventory in the long run.
My most likely scenario for the balance of 2024 is we see a gradual return to pre-pandemic levels of foreclosure starts, but we will continue to see a lag in the number of properties that get to the auction. And we’ll continue to see fewer bank repossessions than we’ve seen in prior cycles. We probably don’t see those come back to normal levels at the earliest until 2025.

David:
Interesting. And what is it about 2025 that you think we’ll start to see that change?

Rick:
One of the reasons I think we’ll see a higher number of REOs in 2025 is simply the length of time it takes people to execute a foreclosure. So if you’re in states that have relatively high numbers of foreclosures starts today, like New York, and Florida, and Illinois, it takes 1800 days on average to finish a foreclosure in New York. So foreclosure start from 2023 probably won’t get all the way through the process until sometime in 2025. And so what I’m expecting is a lot of the activity that we’ve seen start in the last year doesn’t finish until we get through 2024 and into 2025.

Dave:
Rick, the New York Fed puts out some really interesting data about loan delinquencies. And if you look at other debt classes, like credit card debt or just consumer debt, auto loans, it does look like defaults are starting to tick up. Is there a reason they’re going up in those other types of debt but not for mortgages?

Rick:
It’s another reversal from where we were in 2008. Back then, people were paying their car loans but letting the mortgages go. And the running joke back then was you could sleep in your car, but you couldn’t drive your house to work. In today’s market, you’re absolutely right. What we’re seeing is an increase in consumer delinquencies, in credit cards, in auto loans in particular, in other consumer loans. Student loans haven’t started to go delinquent yet, but we’ve only just seen the payments start again on student loans after a hiatus of a couple of years. But mortgage delinquency rates have actually been going down. And part of me believes the reason for that is people realize how much equity they have in these homes, and they are protecting that equity even if it means they’re going to be a little late on some of some of their other credit responsibilities.
The other thing that’s probably worth taking a little bit more of a look at when you were talking about these trends is that a lot of the delinquencies in the other areas of consumer credit are only 30-day delinquencies. So somebody’s missing a payment or late on up payment, but they seem to be catching up pretty quickly after that. And even with the increases we’re seeing, the delinquency rates are still probably around half of what they were back in the Great Recession. So it’s not a crisis yet, but we do watch consumers for financial stress.
Last quarter, actually the third quarter of 2023, was the first time consumer credit card use had ever surpassed a trillion dollars. That’s a big number in and of itself. And it happened at a time when, because the Fed had continuously raised the Fed funds rate, credit card interest rates were on average at about 25%.
So we had a trillion dollars of credit card use at some of the highest interest rates ever. That could lead to some problems down the road. And in the auto market during the pandemic, we saw an awful lot of subprime lending in the auto industry so that people could sell cars, and a lot of those bad loans are simply coming home to roost, so it’ll be interesting to follow.
But the metric I would give people to watch, if you’re curious about mortgage delinquencies, is the unemployment rate. Very, very strong correlation between the unemployment rate and the mortgage delinquency rate. And if you look at late 2023 mortgage delinquency rates, they were at about 3.26%, while unemployment was at about 3.6%. So there really continues to be a correlation. If you see unemployment numbers start to tick up, you’ll probably see mortgage delinquencies start to tick up. But your question is great because, unless a mortgage goes delinquent, it’s not going to go into foreclosure. So if you’re looking at historically low levels of mortgage delinquencies, it stands to reason that we’re not going to see a huge wave of foreclosures until those numbers change.

Dave:
Thank you for answering that. That’s something I’ve been wondering about for a while.

David:
This is such great context for all of our listeners. And I imagine many of our listeners want to know if these foreclosure trends will lead to more supply. We’ll get Rick’s answer to that right after this break, and stay tuned to the end as we answer a listener question on our Seeing Greene segment. My favorite part of the show.

Dave:
So it sounds like, Rick, at the top of the show, I mentioned that foreclosures are pretty important to the housing market because it is one channel by which supply enters the housing market. It sounds like you don’t believe, and the data seems to show that foreclosure is probably not going to add a lot of supply next year. So, Rick, let me ask you, do you think supply will increase in the housing market in the coming year and help thaw the market a little bit? And if so, where could that supply come from?

Rick:
So supply almost can’t help but go up a little bit in 2024 because it’s been so, so low in 2023, almost the lowest levels in history. And that was certainly true for a while in the new home space, where we had just almost no supply of completed homes available for sale. I don’t expect to see a flood of existing homes listed for sale next year. In fact, I don’t think we can expect to see a whole lot of those homes listed until we see mortgage rates drop down into the fives.
Right now, you have 70% of borrowers with an active mortgage who have a mortgage payment of 4% or lower, and the math just doesn’t work. It’s not that they’re being picky and don’t want to sell, it’s they can’t afford to. You sell a house with a 3% mortgage. You buy another house at exactly the same price, and you’ve effectively doubled your monthly payments. Most people simply can’t afford to do that. So that’s going to continue to suppress the number of existing homes that are listed.
You will see people who need to sell their house continue to list their homes, and that’s people in foreclosure, people that get a job transfer, people that have a kids or get married, or there’s a death or divorce. So you’ll see that. But where I do think we’ll see an increase, and we started to see indications along those lines, is in the new home market. We saw housing starts for single-family owner-occupied units jump up pretty significantly in November, which is the most recent month we have those numbers for. And the builders seem to be trying to take advantage of a market where their prices are almost at a parity level with the median price of existing homes being sold and where they’re offering concessions and buying down mortgage rates for their buyers.
So in some markets, it’s actually a better economic decision for a buyer to buy a new home than it is to buy an existing home. And I’ve actually seen some investors take the tack of targeting new home builders in their markets and looking for kind of the builder-close act deals. So you go to a Pulte, or a Toll Brothers, or some other builders and a development. And they have two homes left on the lot. And they want to close out that development, and reliquidate or recapitalize, and move on to their next project. So it’s a time when investors looking for the best deals really, really do have to be pretty creative in their approach. And in some of those markets, those properties represent good deals for rental property investors. Tough to get them to pencil that for a flipper, but for a rental property investor, there might be an opportunity there.

David:
One of the things I liked that you mentioned, Rick, is that foreclosure activity is related to economic activity, right? A big piece of it is recognizing that if there’s equity in the home, you’re way less likely to get a foreclosure because the seller is just going to sell it even if they fall behind on their payments. But the other ingredient in the recipe of foreclosure is you can’t have equity, and you have to not be able to make your payment, right? So what are some of the economic indicators that you pay attention to, or you think that real estate investors should be paying attention to, that aren’t directly related to foreclosures, but sort of are the lead into towards them?

Rick:
Yeah, you just tapped into the biggest one, David. The unemployment rate is huge. I’m still among what’s probably a minority of people right now who believes that the country will see a bit of a recession this year. Not a particularly severe one, not a particularly long one, but something of an economic downturn. I think the consumers pretty much tapped out at this point. And if we do see consumer spending come down, it accounts for 70% of the U.S. GDP. And theoretically, at least we could see a bit of a recession. If that happens, we’ll see unemployment numbers go up. If we see unemployment numbers go up, we’ll see mortgage delinquencies go up, and more people either having to sell off these properties or wind up in foreclosure. So that’s the biggest number I look at. And in a lot of markets, your national numbers are almost meaningless, so you really have to be looking at what’s going on in your neck of the woods.
The other number that really is important for investors to keep an eye on if we’re talking about foreclosure potential is sales volume and prices. If you’re in a market where prices are going down, it’s that much more difficult for a borrower who’s kind of marginal in terms of their equity to be able to avoid a foreclosure. So if you’re in the Pacific Northwest, if you’re in coastal California, particularly some of the higher-priced areas, if you’re in Austin or Boise, some of the markets that were just soaring during the pandemic, you’re likely to be seeing prices come down a bit. On the other hand, if you’re in the Southeast or the south, huge swaths of the Midwest, we’re seeing prices go up over 5% year over year. So you’re looking at the number of jobs created. You’re looking at unemployment. You’re looking at sales volume. You’re looking at prices. And a combination of those that looks negative tends to lead to more foreclosure activity.

David:
Great stuff there. This is awesome, Rick. I really appreciate you sharing this, especially because foreclosures are such an interesting topic in the world of real estate investing, but there’s a lot of misinformation out there. And a lot of people that have the wrong impression about how these things actually work.

Rick:
Just one thing I’d like to add, if you guys don’t mind. I still see an awful lot of people talking about the pending and impending housing market crash. None of the data supports that at all. One of the things that could precipitate a foreclosure cycle is a housing price crash. And I still see a lot of people trying to sell stuff on YouTube purporting this impending doom. None of the data supports it. And even if we did have home prices come down, much, much more than they’re likely to anywhere across the country, that doesn’t necessarily mean somebody goes into foreclosure. It just means they have less equity. Again, we have $31 trillion equity cushion right now, which is just the highest it’s ever been. So I just encourage investors not to buy into the hype, not to buy into the people that are selling services to get you ready for that foreclosure tsunami that’s about to hit. There’s just nothing in the real numbers out there that suggests any of that stuff’s going to happen.

David:
I appreciate you saying it because I say it a lot, and people get upset. So now I don’t have to be the only one that’s sort of carrying that torch. It’s very easy to scream. We’re going to have a crash, especially because the last one was so traumatizingly horrible. Everyone sort of got it in the back of their mind if they were there. So even hinting that that might happen again will just elicit this very strong fear response. That’s how you get views. That’s how you get clicks. That’s how you get likes, but it’s not how you actually run a successful portfolio.
Thank you, Rick, for being a light in this dark and scary world of foreclosure night in the real estate investing realm. We will see you on the next one.
All right, let’s jump into the next segment of our show, Seeing Greene. As a listener to this podcast, you are a part of the growing and thriving BP community, and we love you. And this segment is where we get to connect with community members like you directly by answering listener questions that everybody can learn from.
Today’s question comes from Nelson in Northeast Pennsylvania. Nelson writes, “I’m a big fan of the podcast and enjoy listening to every episode. Thanks for all the wise advice and amazing work that you and the BP team do. I purchased a triplex in 2015 and house hacked it, and the property value has roughly tripled leaving me with about $300,000 in equity and great cash flow. For my next investment I’m looking for something priced around 300 to 500,000, but I’m not sure what’s the most optimal way to apply my new equity. Currently, I’m looking into getting a HELOC but would also consider a cash-out refinance if needed. My question is how would you recommend that I use the equity in a case like this? Should I purchase a $300,000 property in cash giving me additional buying power and leaving only to HELOC to pay down, or should I use this equity to put 25% down on a more expensive property and pay a separate new mortgage? I’m not averse to taking risks, but I just want to be careful about over leveraging myself.”
Great question here, Dave. What do you think should be considered?

Dave:
Well, first of all, thank you for allowing me to be a part of Seeing Greene. This is quite an honor. I feel like I’ve made it in my podcasting career now that I get to be on this segment. It’s very fun. This is a great question from Nelson, because I think a lot of people face this. You find one deal. It sounds like Nelson’s had a ton of success here, which congratulations, and you try and figure out what to do next. And I feel like I always give boring advice here because it really does depend on your personal goals and what you’re trying to accomplish. But I do think the question is about really where Nelson finds himself in his investing career, because buying a property in cash does feel appealing. I think for a lot of people right now, if you have that ability because mortgage rates are so high, but you have to remember that that is going to eat up some of your appreciation potential because you won’t have leverage on the property.
And just to remind everyone, leverage is a benefit you get when using debt because, proportionally, when your property goes up in value, you earn a higher rate of return. And so generally speaking, for most people, and I don’t know Nelson’s specific situation, I think that if you’re sort of earlier in your investing career, I think taking on at least some debt is appropriate because you’re going to get the benefits of that over the long run. Plus, the benefit of buying in cash is better cash flow. And if you’re continuing to work and have a full-time job, you might not need that cash flow right now. That’s sort of how I see it, David. What do you think?

David:
When prices and rents were… They’re never guaranteed, but as about as close to a guarantee as you can get the last eight years or so that they were going to go up. I leaned more towards erring on the side of boldness. I think you should borrow more. I think you should buy more. And I made it clear that my stance on that was because the government was creating so much money. There was so much stimulus going on that all the winds were at your back and pushing you forward. Now, does that guarantee a deal’s going to go wrong? No, but it definitely puts the odds in your favor.
In the market we’re in right now, we’re sort of in a stalemate. It’s not a bad market where we think prices and rents are going down, but it’s just not as likely to go up. We sort of got opposing forces. They’ve got everything locked into one place. So I would still say buying is a good idea, but I wouldn’t say buying aggressively is as good of a plan.
I would like to see Nelson probably take out the HELOC, buy something in cash, use that extra cash flow from the property that doesn’t have a mortgage to pay off that HELOC, which theoretically means every payment he makes on it is going to be less than the last one was.
Now, the reason that I like that is it covers him on the downside because he’s paying off his mortgage. It’s a safer way to buy, but it also gives him upside potential if the market does turn around. If rates drop back down to something in the mid-fours or something, or we get another round of stimulus and like, “Oh, here goes the party again. Prices are going up,” he can always throw a mortgage on the new property, put more debt on it, and now he’s got that capital to go play in the game when the odds are on his favor.
So you have to… There’s no guarantees. You have to put yourself in the position where you’ve got flexibility in different areas. I think with the market we’re at right now, but of a stalemate, he’s got some upside. He’s protected against some downside. It’s sort of right down the middle. What do you think about that?

Dave:
Yeah, I think that’s a very good and defensive strategy, and generally agree with that approach in this type of market is definitely not leveraging yourself. One thing that I’ve been considering for deals is sort of taking the middle road and maybe putting 40% equity into a deal instead of what is usually the minimum for an investor of 25%. Would you ever consider doing something like that, David?

David:
This is a funny thing that you’re asking me that. So I was talking to Jay Papasan. He’s the author of The One Thing with Gary Keller as well as a lot of the other Keller Williams books. And he said something that made me feel really stupid. I was saying, “Yeah, there’s not much cash flowing right now.” And he goes, “Unless you want to put 50% down.”

Dave:
Yeah.

David:
That’s a great point. We just sort of assume 20% down is the only way to get cash flow. So we analyze a deal. It doesn’t work at 20% down. We go, “Oh, there’s no cash flow. There’s no point of buying real estate. I’m just going to sit over here and sit on my thumbs.” That’s not true, though. If you have more money to put down at will cash flow, you’re just going to get a smaller ROI because the capital investing is greater.
And so I think what you’re saying is a great point. If you’ve got more money, you still can buy real estate, and you’re not taking on additional risk because it is going to cash flow. You just can’t buy as much of it, which is one of the reasons that I continually give advice that we need to be saving our money and making more money, not just thinking about real estate investing. When real estate is doing awesome, of course, all we talk about is how to buy more of it, how to acquire it, how to build value in it. But when it’s not doing awesome, it’s just doing okay. You can still do awesome with the other two pillars of defense and offense, which I covered in my book, Pillars of Wealth, and you can get that on the BiggerPockets bookstore as well as your book, David. Do you want to share where people can get your new book?

Dave:
Yeah, thank you. It’s right behind me. I just got it for the first time, actually holding it in my hands. It’s called Start with Strategy. You can find it at biggerpockets.com/strategybook. It’s all about how to individualize your approach to real estate investing based on your own goals, risk tolerances, and circumstances in life.

David:
All right, so do you ever want to Dave and I visit your house at the same time? Go to the BiggerPockets bookstore, buy each of our books, put them on the shelves next to each other. It look like we’re holding hands, and you can tell your friends that you’ve been visited by David Greene and Dave Meyer at the same time.
Dave, thanks for joining me on the podcast and on Seeing Grain. Awesome doing a show with you as always. Hope to see you again on our next joint venture. And if you didn’t know, Dave is a huge aficionado of sandwiches. His Instagram is TheDataDeli, so go check him out there and let us know in the comments on YouTube what your favorite sandwiches because we want to know.
This is David Greene for Dave’s Strategy and Salami Meyer signing out.

John Lavollo, UBS analyst, joins ‘Squawk on the Street’ to discuss the optimism in the housing market in 2024 and outlook for the sector.

Ashley:
This is Real Estate Rookie, episode 356.

Tony:
Today, we have the data deli himself, Dave Meyer. You guys might know Dave. He is the host of the BiggerPockets on the Market podcast. He’s the VP of Digita at Bigger Pockets, and just an all around really awesome and intelligent guy, and I love talking to him. Today, he’s got a new book out. It’s called Start with Strategy. We’re going to talk a little bit about how strategies should be played into your journey as a rookie real estate investor. Guys, this is probably one of the most overlooked things I’ve seen rookies do, so make sure to pay attention in all of today’s episode, because you’re going to get some good stuff.

Ashley:
As always, I’m Ashley Kehr, joined by my co-host, Tony J. Robinson.

Tony:
You’re listening to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey.

Ashley:
Today, we’re going to learn that investing is more than just running analysis. Today, we’ll get into three of the five things you need to evaluate when you are starting in real estate, or maybe you need to even re-evaluate to hone in your real estate strategy. So, this will include personal values, transactional income plan, and a resource audit. Have you guys done any of those before? We may even have a little bit of time to get into some market predictions from our favorite data wrangler to see what he has in sight for 2024.
Dave, welcome back to the show, and Happy New Year.

Dave:
Thank you, Ashley, Tony. Happy New Year. It’s great to be here.

Ashley:
Is this maybe your third time on the show with us? Maybe even more. I think you’re one of the few that has been on several times with us.

Dave:
Yeah, I think I have. It’s been a long time though. I feel like it’s been a year or two since we’ve done this, so I’m glad to be back and talking about this topic, which I think is particularly useful for rookies. So, I think this will be a great discussion.

Ashley:
Dave, part of the reason you are here today is because you have a new book out too. So before we get any further, I’d love to just hear a little bit about your book.

Dave:
The book is called Start with Strategy. The basic idea is to help real estate investors develop a business plan for the real estate investing business. We call it investing, but as everyone who’s getting into this knows real estate is really entrepreneurship. Just like any business person, anyone who’s starting a company, you need to have a strategy and a plan that you’re going to follow not just for your first year, but figure out what goals you’re aiming for in the long run, and work backwards to decide how you’re going to get there. The book is a framework. It’s super interactive, but also provides a lot of background context on how every individual, no matter what experience level you have, can come up with a strategy that’s personalized to you and your preferences, goals and all that.

Ashley:
Dave, do you have maybe a story that you can share with us as to a reason as to maybe why you decided to write this book, or why it’s important to start with strategy? Why did you even think of this?

Dave:
I think we all experience this in real estate, where you get overwhelmed by how many amazing choices there are. There are so many good ways to invest, and it’s hard to pick. I think I see this all the time, both I’ve experienced and see with other investors, that you don’t really know what to do first because you don’t necessarily know where you want to end up. I have experienced this quite a lot in my life. When I was right out of college, I wanted to do so many different things with my life. I wanted to travel and be a backpacker. I thought about going into finance. I wanted to be a ski bum, and I was really struggling to figure out what to do next, because I didn’t really have an idea of what I wanted my life to be in the long run.
Actually, I went out to breakfast with my grandfather, and I was explaining him my young angst about not knowing what I wanted to do with my life. He asked me a really simple question. He was like, “Well, where do you want to end up?” I was like, “I don’t know. I’m just trying to figure out what to do tomorrow. I don’t know. I don’t want to think about a year from now or 10 years from now.” He is like, “Well, you’ve actually quoted this thing from Alice in Wonderland,” but he basically said, “If you don’t know where you want to go, then your next step doesn’t even matter, because you don’t have a destination in mind, so what route you take is irrelevant.”
I’ve thought about that a lot over the last few years, and really worked on figuring out what my long-term goals are, and then working backwards into the strategies specifically in real estate that work for me. So, I asked him, “What should I do next?” He pulled out some old Alice in Wonderland quote, and basically said… I’m going to butcher this, but paraphrasing it, basically said, “If you don’t know where you want to end up in your life, it doesn’t really matter what you do next, because any path will lead you to somewhere. Unless you have a destination in mind, it’s really irrelevant.” I’ve thought about that a lot throughout my life, and it’s guided a lot in my decisions, but I think it’s true in real estate as well where people want to figure out, “Do you want to flip houses? Do you want to be a rental property investor? Do you want to quit your job?”
When really all of those answers, you can’t really come up with answers to them unless you have an idea of where you want to be at the end of your investing career. That’s what inspired me to write this book was helping people figure out what they want, and then plan backwards.

Tony:
Dave, I think you bring up a really good point, and I want to comment on that. First, I just want to clarify the quote, because I think it’s such a good quote. I actually looked it up right now. Alice says… She’s talking to the Cheshire cat. She says, “Would you please tell me which way I should go from here?” The cat says, “Well, that depends on where you want to go.” Alice says, “I don’t really care where I go.” The cat says, “Then it doesn’t matter which way you go.”

Dave:
Thank you. Thank you. My grandfather would be very proud. Happy that you actually got the quote.

Tony:
I think it’s such an important thing, Dave, for rookies to understand, because you are inundated with all these different options when you first start. There’s different asset classes. There’s single family. There’s small multifamily. There’s large multifamily. There’s storage parks. There’s everything else you can think of. Then within those, you can flip. You can wholesale. You can hold long-term. You can do turnkey. There are so many different strategies, and I think what most people get caught up on is that they want to try a little bit of everything, which maybe isn’t bad to begin with just to see which makes the most sense for you. But I think after a time, you’ve really got to dig deep into one strategy to get good at that thing.
The goal is that it does align with your long-term goals of where it is you want to be. I always tell people, “When you’re investing in real estate, you’ve got to look at what your motivations are. Is it cashflow? Is it tax benefits? Is it appreciation? Is it you want to just have a vacation home, and someone subsidizes the cost for?” All those things tie into what strategy makes the most sense for you. So I guess for you, Dave, after you had that conversation with your grandfather, what was the realization you had about what does Dave want out of real estate investing?

Dave:
It took me a while, and ultimately, when I was maybe 22 at the time, I felt very conflicted about two different paths in life. Part of me really just wanted to be a heated nest. I’d like to ski, and I just like to hang out with my friends, so I wanted to do that. The other part of me has a lot of frankly just financial anxiety, and so I really wanted to make a lot of money to have more stable income. I felt very torn, and ultimately just decided that my goal for my career in life was to find a way to do both. I really was dead set on having fun, having great relationships with my friends and family, but still making money and not making a trade-off, because it’s easy to make a trade-off.
If you want to make a lot of money, you can work a lot of hours, or you can just have fun, but that comes with financial consequences. So, I set out to find a way to do this, and then I discovered real estate investing, and I was like, “This is the way that I’m going to do it. It’s a perfect way to strike the balance between living a life that you actually enjoy, and providing yourself and your family with financial security.” That’s what got me into real estate in the first place.

Ashley:
You just mentioned having some anxiety. How does that actually play into making that decision?

Dave:
I mean, I think I just ultimately… Realistically, my upbringing, my parents were fine financially for a while, and then it all exploded and melted down very quickly for my family, and put us in a difficult situation for a couple of years. That just stuck with me, and I always had this feeling that your career could go away. My dad lost his job for a while, and I just didn’t want to be in that position. It always sort of stuck with me, and I was always hustling and trying to make side businesses, and working two jobs in college and after school even. That was great, because it made me feel better about my financial situation, but I also was in my early 20s, and wanted to do stuff.
So, I felt like I really needed to find a better balance, and not just only focus on this financial anxiety that I have, and find a healthier way to deal with it than overworking.

Ashley:
We have to go into break here, but real quick, where do we actually start with this? What is the starting point? You had mentioned you need to know where your destination is. What would you call that starting piece? If we’re on the game board of we’re playing some Alice in Wonderland board game here, and we’re trying to pick, I’m envisioning Candy Land in my head. Which way do we want to go? What is that first step, that goal, that destination, the big Candy Land castle? What do you call that, and how should everybody be looking at that as their first step?
If you guys are enjoying this episode with Dave, you can get more from Dave and other real estate experts in a brand new multi-day virtual summit that is happening January 29th to February 2nd, Get Prepared to be Successful in 20204. This is going to be a four-day summit that is exclusive for pro members with some access for free members, so make sure you upgrade to that pro membership before January 29th. Visit biggerpockets.com/virtualsummit to get all the details on Dave Meyer and the real estate experts on how to access this exclusive event, and to register. Let’s hear a word from our show sponsor.
Okay, welcome back from our short break. Dave is going to get into your first step. We had mentioned playing the game Candy Land. You’re trying to figure out your path. There’s the Candy Land castle at the end. What is that? What is the game piece? What is the first thing that you need to decide and build out and plan before you can actually build out your whole strategy? Dave, what would you call that piece?

Dave:
For me, the whole place, the destination you’re trying to achieve is what I call a vision. I try and re-craft this every single year, try and make sure that I’m still pointing in the right direction, but there are subcomponents of vision. You have financial goals. You might have what your job is going to be, some professional goals, but for me, the first thing I always reevaluate is what I call my personal values. I know this doesn’t necessarily sound like real estate investing, but I think it’s super important to figure out why you’re investing, and why you’re doing this in the first place, and what you actually value in your life.
This is common in businesses, right? We don’t talk about it as much in real estate investing, but every Fortune 500 company has values. They have a mission statement, and so I encourage people to do that for themselves. It’s something I do for myself by creating or tweaking my own personal values each year to make sure that everything I do in real estate or really in my whole professional life is aligned with the life that I want to live.

Tony:
Ash, I know for me, I probably haven’t done a good enough job of creating a value statement, I think, for my real estate business. Have you put any thought into that, Ash?

Ashley:
I actually had a consulting company that I was working with last year that helped me with doing a little bit of planning and writing out my mission statement and the vision for the company, because we were hiring for a couple of virtual assistants. It was the thing that I procrastinated on the most.

Dave:
It’s really hard.

Ashley:
Out of all of the stuff that I had to get to them, that was the thing. They’re like, “You know what? We’re going to send you this form. Just fill out this form, and we’ll help you do that, and even fill them.” They pieced it all together by doing a really good job of asking me certain questions that could help them understand, “Okay, we think this is what you would want your mission statement to be.” Then I would read it, and tweak it, and change it a little bit, but that helped me. But as far as sitting down and drawing a blank board, or Googling other companies’ core mission statements, their values, what are their five pillars? Always been very difficult for me to do that, because I’m just like, “Just sit down and do the work.”
I don’t care, whatever company culture, things like that, but I know that it is really important, and things that you should do. I definitely learned a lot last year doing it with that consultant.

Tony:
I guess, Dave, what’s your guidance for that rookie investor who’s maybe never taken the time to sit down and think about values? How does one even come up with that list? Is it 50 values? Is it five values? Just walk us through maybe some tactical secs and actually putting that together.

Dave:
Sure. Well, first, I’ll say I definitely identify with this. I came across this idea of personal values from an executive coach that I worked with for a few years, and she was like, “You have to do these values.” I was like, “Man, I’ve got so many other problems to deal with. This is the last thing I’m going to do.” Finally, after maybe six months of nagging me, I sat down and did it. It’s honestly changed my life maybe more than any other professional thing I’ve done. I know that sounds strange if you’ve never done the exercise, but the way my coach, Lauren, had put it to me was, “Your values are the things that you can’t live without in your life.”
So, she encouraged me to come up with no more than five personal values, and you really… It’s hard. You really have to think about it, but she gave me a list of basically words. It was 50 words. This is in the book. We have a template for it, but circle any words that resonate with you that are important to you. Then you basically go through this pruning process of narrowing down what things are really important to you. It’s hard, because everyone wants to… Most people aspire to have a lot of these things. They’re words like honesty, integrity, trust, adventure. Those all sound pretty good. But as we all know, as human beings, you have to make trade-offs.
You can’t be everything, and so you need to narrow down what you want. Ultimately, I was able to get it down to five things that are super important to me. I use that, yes, in real estate investing all the time, and I’ll explain that in a minute, but I just use it in my job. I use it in my friendships and how I choose to spend my time every day. I can just share them with you. For me, the five are growth, just like personal growth, adventure, freedom, mental and physical health, and meaningful relationships. I look back at those all the time. If I think about, “Do I want to write another book?” I have to decide like, “Is that going to impede on any of my values, or is it going to support my values?”
If I decide, “Do I want to flip a house,” is that working in alignment with the things that matter to me in my life or not? It really just has helped me improve my decision-making skills a lot, and that applies to real estate for sure.

Tony:
Dave, I appreciate you sharing that. One question that it makes me think of is do you always feel that those values are an equilibrium where they’re always perfectly balanced, or do you find yourself going through seasons where maybe you prioritize one value over the other? Because that’s something that I’ve found as I’ve progressed in life and in entrepreneurship and in business is that sometimes you have these seasons where you can really focus in on one piece of your life, and there’s other seasons where you got to shift that focus towards something else. So, is your goal to always keep those perfectly balanced or just to be within range, but sometimes you got to shift resources and priorities?

Dave:
That’s a great question. I wish it was easy to do all of them, and keep them all in balance, but I think it’s unrealistic. I think the key is to… If you’re going to live outside of some of your values, that it’s a conscious decision. Sometimes I’ll prioritize work, and that means I’ll have less adventures, or maybe I’ll spend a little bit less time with my friends for a couple of months, but that’s a decision I’m making to pursue another one of my values, or something else that’s really important to me. I’m not just letting this happen to me, and just making decisions willy-nilly based on whatever opportunity comes up. Because like you said, it’s impossible, but I think it’s important to know, “Okay, I’m going to take a step back from this,” but knowing that to live the life you want, you have to get back closer to equilibrium at some point.

Ashley:
Dave, you had also mentioned that one of those beliefs that were important to you was personal relationships. So, how does this impact your investing, your personal core values per se?

Dave:
The way it mostly impacts me is that I actually pretty significantly limit the amount of time I’m willing to spend investing in real estate. I know it sounds silly for someone who does this for a living, but I work full time, and so my real estate investing portfolio is above and beyond my job at BiggerPockets. I find that if I were flipping houses, or doing BRRRRs, or really trying to grow my portfolio as quickly as humanly possible, I would run out of time for the meaningful relationships that I want to prioritize. So, actually, we can talk about this later, but for me, my goal is 20 hours a month on my portfolio or less on average. That, for me, gives me enough time to pursue the meaningful relationships that I have outside of real estate.
Now for some people, that could mean being close with the people you work with. I live in Europe, and so I almost exclusively invest passively. I don’t have a lot of opportunity to build meaningful relationships with the people I invest in real estate with. So, I need to limit and compartmentalize my real estate investing so that I can find those meaningful relationships elsewhere in my life.

Tony:
All right, guys. Dave, so much good information that you’ve shared already as expected, but coming up, we’re going to cover how to audit your personal resources. But before we go there, Dave, can you tell me what exactly is a transactional income plan, and how does that add to this vision that you’ve talked about so far?

Dave:
Transactional income is just a source of making money that’s outside of investing. So, a job is basically transactional income, but there are types of real estate that are transactional as well, like flipping a house, or being a real estate agent for an example. I think one of the things that I struggled with early in my career, and I see a lot of rookies struggle with is trying to figure out what they’re going to do and if they should make real estate investing a full-time job. To me, it’s super important in your vision to figure out whether or not you want to make real estate a full-time job, or it’s going to be something you do on the side, because that will really help you narrow down the options that you have as a real estate investor to just the ones that make sense.
Some are easy, whether you work full-time or not. Others really only make sense for people who are full-time into real estate. I think making that distinction is very important and helpful for setting your strategy.

Tony:
Dave, one thing that makes me think about, so many people in our rookie audience are focused on walking away from their day jobs, and understandably so, but I think some people almost get too excited about that idea sometimes. They lose sight of how important that transactional income is to their goals of building their real estate portfolio. It makes me think. Someone shared this analogy with me before, but have you guys heard the term escape velocity? It’s like you have to travel at a certain speed to break Earth’s gravitational pool, and if you don’t travel fast enough, you’ll get to a certain height, and then earth is just going to pull you back down.
It’s a similar concept for real estate investing. If you step away from your W-II job too soon, you haven’t yet reached the speed to reach escape velocity. You’re just going to pull back down to reality. I’ve seen people, I’ve met people who have maybe pulled the trigger too soon, and then they have to go back out into the workforce again, because they weren’t quite ready to step aside on their own. So, there’s a lot of benefit to keeping your day job. I think the goal is to get to a point where you’ve 1.5x or 2X what you need to survive on before you pull that trigger.

Ashley:
Even then if you have hit that 2X, that 3X, whatever that amount is if you’re able to do both things too, and you enjoy your job, and you enjoy being a passive investor, then that’s something you can do too. I think there is that big misconception of, “I haven’t reached financial freedom until I’ve quit my job.” Well, no, that’s not true. You can still make it as a real estate investor, and still carry on a W-II. That’s even more impressive if you’re able to balance out both than just, “You know what? I have to quit my job, because my properties are so overwhelming. I need to manage them, and take care of them.”
So yeah, I agree. I think that’s a common misconception is that you need to build your real estate, and then quit your job, and then you’re free, and everything’s wonderful and great. But in the U.S., one thing is health insurance. That’s actually an incredible difficulty once you become an entrepreneur, and you don’t have that anymore. So, it’s not always just the pay. It’s the benefits too.

Dave:
I think you both hit on really important topics here. I think it’s really just comes down to what you want out of life, because I think most people say, “Oh, I want to quit, so I can work on real estate full time.” That might make sense for you, but you have to recognize in 90% of those cases, you’re just trading one job for another job. So, you’re trading your W-II job for working at real estate full time. I am making presumption, but both of you work in real estate full time. I’m sure it still feels like you have a job, right? So, it’s really up to what provides you… To me, it’s just two questions. What provides you with more resources, and what provides you with the most fulfillment?
Because if you have a job that you don’t like, but it gives you a lot of money to invest, or a lot of time to invest, or skills that you can bring to your portfolio, you may want to stay in your job, or even if you just really like your job, and you’re fulfilled by it, that’s a trade-off that you might be willing to take. So for me, I only recommend people quit their job and go into real estate full time if it will move them up on one of those spectrums. Is it going to improve the amount of money you’re going to make, or the time that you have to invest, or is it going to make you feel more personally fulfilled? Then you might want to consider it, but don’t just do it, because people on Instagram are doing it, and make it seem like that’s the ultimate goal of real estate.

Tony:
Last thing I’ll say about the personal income piece is that what I’ve found, what I’ve seen from other folks is that the fastest way to grow your real estate portfolio, unless you’re doing creative finance, or you’ve got capital partners, but if you want to use your own money from your own W-II job is to grow the amount of money you make in your day job. Oftentimes, the fastest way to do that is to leave to another company. I know for myself, I got, I don’t know, like a 45% pay increase by going from one company to the next. It’s crazy to think that someone who’s never seen you work before is willing to pay you 45% more than a company you’ve been at for years, but that’s typically the case.
There was this study. I can’t remember. I wish I knew the exact numbers, but it looked at people who job hopped every 24 to 36 months versus someone who stayed at the same job. They lined those people up after 15 years, and the people who job hopped made exponentially more than the people who stayed at the same company. So if you’re looking for a way to shovel, then focus on maybe looking at a new position with a new company.

Ashley:
Didn’t they say that’s the problem with the-

Dave:
Yeah. Can we tell that to BiggerPockets? It’s like they always reward the new customers. They’re like, “Come to Verizon, and we’ll give you a new cell phone.” You’re like, “I’ve been here for years. Give me the new cell phone. I’ve been coming here forever.” It’s like the same idea with jobs. They need to incentivize people to leave something that’s comfortable a lot of the time. So, it makes sense. I think the other thing in addition to making more money too is if you want to grow your portfolio, but you’re working 70 hours a week, can you find a job that maybe you make even the same amount of money but you work 40 hours a week? That opens up a whole lot of time where you can be looking for deals, or networking, or doing all this other stuff that could help grow your portfolio.
I just think thinking critically about your job and how it supports your investing is really important. It’s not just how quickly can I leave it? It’s, “Is this helping me get to ultimately where I want to go” For some people, the answer might be, “Yes, you should quit your job.” If your vision is, “Hey, I want to leave my job in five years,” you can make that happen sometimes. Some people can make that happen, but if you know that, “Hey, I want to keep working for 20 more years,” that’s going to open up so many more real estate investing strategies to you. You can take on more risk. You can think more long-term. More markets are going to be available to you. So, knowing where you stand on that spectrum will be super helpful.

Ashley:
We’re going to take a short break real quick, and then we’re going to be back and just follow up talking about a resource audit and what you can do today. Then we’re going to go into a little bit of 2024 predictions.
Welcome back to the show. Dave, the third thing that we wanted to finish up here and talk about is doing a resource audit. So, what is this that something somebody can implement today? Maybe is this something you’re going to continuously do throughout the year or maybe once a year?

Dave:
Resource audit is basically looking at the various resources that you have today to contribute to your portfolio. This is really just helpful in figuring out what you should do next. As we were talking about earlier about, money or capital is obviously a very important resource for real estate investors. It is a capital intensive business, and so knowing how much capital you have is super important, but one of the things I personally love about real estate investing is that you can get by or get started. Even if you don’t have capital, there are other resources like time and skills that you can contribute to a portfolio to help you get started. As long as you have one of those three things, you’re able to build a portfolio.
Just a small example, when I got started, I had no money. I had no skills, but I had a lot of time, and so I used that time to go find deals. I used it to self-manage a property that I basically only earn sweat equity in and that was able to get me started. So, even if you’re new and thinking, “I want to get into real estate in 2024, but I don’t have a lot of money,” figure out what you do have, because there are things that you can contribute. If you have time or skill, like I said, you can find ways to use those resources to get into real estate, but for me, the first step is just figuring out what you got.
You got time. You got skills. You got money. If you don’t have any of them, it’s going to be hard, but if you have at least one of those three, there is a path forward for you.

Tony:
Ash and I talk about this in our book, Real Estate Partnerships, where every real estate deal, it’s like a puzzle, and certain people have certain puzzle pieces, and they’re missing other puzzle pieces. So if you have time, if you have the ability to analyze deals, maybe you’re lacking capital, or maybe you’re lacking the ability to get approved for a mortgage, go find someone else that can plug those pieces in for you, and then the two of you work together to take that deal down. If the inverse is true, where maybe you have the capital, you have the ability to get the debt, but you’re a physician who works 90 hours a week or something crazy like that, and you know you don’t have the time, go find some young college kid who just graduated, or something like that who’s got an abundance of time that can do that legwork for you.
So, it’s all about finding that puzzle piece that matches with what it is you’re missing as a real estate investor.

Dave:
That’s such a good analogy. It’s so true, and it changes over time. If you start without capital, that’s okay. You just hustle and learn some skills, use your time. For most investors, I find that that’s how almost everyone I know started is they didn’t have a lot of money, but they just hustled their way into it. Then over time, as you have more capital, usually, you buy other people’s time, or you buy their skillset to help you grow. So, that’s why I think it’s useful to do this once a year. Just be like, “All right, now I have less time than I used to have, but I have more capital. So, given that reality, I need to change my portfolio in X, Y, Z ways.” So, it just helps you figure out what to do next.

Ashley:
Dave, how do you evaluate those skills for yourself? When you’re looking at yourself, what skillsets do I have? Is there a way to do an evaluation on yourself?

Tony:
Just to preface that, I think it’s such an important question, Ash, because a lot of rookies, they’re not self-aware as to what value they bring. So, I think this is going to be super practical advice, Dave.

Dave:
Oh, good. I think this is… Again, I agree with you Tony. This is one of the things that most people overlook, because there are a lot of skills, and I think… Basically, in the shortest example, I have a list of skills. I have one in the book, but you can really look on BiggerPockets. I’m sure there’s other places of lists of skills that you need. I think the two important things to think about are, one, how good am I at it today? Two, how hard would it be for me to learn this skill? I think that’s the one that people really overlook, because it’s easy to start and be like, “I’m bad at all of these, and I’m going to try and learn all of them.”
That is where so many people go wrong. I went deeply wrong here. I was like, “I’m going to be super handy. I’m going to start building staircases, and drew in drywall.” I’m so bad at it. I am just awful. There’s no reason I should spend any time doing that, and so I go through these lists, and just say to myself just as an example, finding deals, that’s something I’m okay at. I’m not great at it. I know people who work full-time in real estate who are much better at that than I am. I have a network, so I’m not going to probably do that much time like learning how to do outreach to off-market deals. I’m going to rely on other people to do that.
For deal analysis, that’s something I’m good at, and that’s something I’m going to contribute to my portfolio. When I talk about finance and tax, that’s actually something I have professional experience with, but I hate it, so I’m going to pay someone to do it. I don’t want to learn how to do it. I think it’s just really important for people to be realistic about, one, there’s a lot of things you need to do that need to get done, let me say. You don’t need to do them, but that need to get done for a real estate portfolio to be successful. You do not have to nor should you do all of those things.
So, I think it’s really important to just focus on the ones that you like and that come easily to you, and to outsource the other things. It will save you a lot of time in the long run. Honestly, it might seem like it’ll save you money to try and do everything yourself, but take it from thousands of investors who have tried to do everything themselves. It does not save you money.

Ashley:
I can definitely relate to that too. Dave, I do have a question though as far as when you’re picking your skillset and the things you actually are going to do for your first property, your first business, whatever it may be, is there a preference you have, or a way to differentiate choosing between something you want to do but maybe know nothing about, and have to take the time to learn or something that you do know but you don’t want to do it? You had mentioned finance and taxes. You know that stuff. You could do it but you hate it, but maybe compared to doing drywall, whatever, you’re actually super passionate about it.
You want to learn it. It would be fun to get your hands dirty, but it’s going to take you longer. You’re not going to do as good of a job of doing it as someone. So, is there any kind of balance where maybe you should do something you hate doing, because you do know it? I guess, just what are your thoughts on that as far as putting a value add to what your skillset is?

Dave:
That’s a great question. I think it comes down to what other resources you have, because if you don’t have a lot of capital or time, and you’re really relying on your skillset to grow your portfolio, you may have to contribute something you’re not good at. I can imagine or know people who are contractors who don’t really like it, but they want to get into real estate. It might be a good way for you to get in to use your skills as a contractor at the beginning while you build up those other resources. So, I think there are things like that. I also think there are certain skills that every real estate investor just needs to have at least a baseline of.
To me, I call it portfolio strategy, but that’s just what we’re talking about here is, one, just understanding where you want to be and how real estate can get you there, I think, is super important. Deal analysis, everyone needs to be able to do at least a basic level of deal analysis. You can’t really outsource that. I do think networking is also another skill that people overlook that you can’t outsource. You can’t have someone make relationships on your behalf. So, I think there’s certain things like whether you like it or not, you probably should learn those skills. Whereas things like taxes or property management, those things are easily outsourced.
I guess that’s another way you could look at it is taxes, property managers, lawyers. Those are all things, contractors. You can hire those people easily. Could you hire someone easily to analyze single family rental properties for you? Probably not. I think that it’s probably just worth learning for yourself. So, I would think about it that way.

Ashley:
That’s great advice. The one thing that I would add to it too is your own time and the value on your time. If you’re considering,,, you say you have your W-two. You have a side hustle, maybe a remodeling business, so you could go and you could stop remodeling for other clients. You could go and you could work on the house that you’re flipping yourself. Well, what is actually the time value trade-off on that? As a contractor doing luxury remodels, are you making $100 per an hour? But if you go into your own flip, and you do the math, and after three months of flipping this house, you only ended up making $50 an hour, so would it been more cost-effective to actually just hire somebody else out to do it, and then you go and maintain doing your flips, and then you ended up netting the same amount, $50 or whatever it may be, because they were able to work all day, and then ended up selling the property in a month instead of the three months, because you had to do it at night?
Things like that too, I think, are important to take into consideration as to your time value. That even goes back to quitting your job. Are you going to be working more hours but actually making less being a real estate investor, because you’re spending more time on it than what you would if you would actually go to a W-2, and you could hire out?

Tony:
A lot of times, Ash, I think, does come down to the numbers and what makes more sense as you lay everything out. I think the mistake that a lot of rookies make is that they just go with their gut, and they don’t really back it up with a deeper analysis here. One thing I just wanted to comment on, Dave, you mentioned being able to outsource the networking. I actually read in this book, and it was called… I think it was called Book Yourself Solid. It was an old marketing book that I read years ago, but he actually did have this process for outsourcing some of his networking, where he had someone on his team that every month, they would just send out emails to people in his database or whatever it was. It’d be something simple like, “Hey, Dave, see you got a birthday coming up this month. Hope all is well.”
Then when they replied, he would reply himself, but he had his team going through and send an emails through his inbox for these different little things, and he would just reply when those came in. So, super ninja trick and probably beyond what our rookies are working on right now, but it could be an easy way to build that out. All right, what I really want to talk to you about, Dave, and what I’m most excited to hear your thoughts on are your predictions for this year. Obviously, 2023 was a crazy year for real estate. We came off this high that we saw in 2021 and early 2022 where interest rates peaked to their highest in decades.
I know I lost money on a flip, I have friends who lost money on flips. We have commercial real estate is going through this crazy cycle. What are you seeing for 2024? I guess first what I’ll ask you is where do you think interest rates are going to go? Are they going to hold steady? Are they going to go up? Are they going to come down?

Dave:
Oh boy, my favorite topic. Let me just tell you, I actually did very well in interest rate predictions in 2023, and very poorly in 2022. So, let’s take that with a grain of salt just so everyone knows. My general feeling is that interest rates are not going to move as much as people think. They’re in the high sixes as of this recording. I’m going to give you a broad guess and say I think they will end with the first number still being a six at the end of this year is my guess. I’m hopeful that they might come down into the low sixes, but I just want to explain that a little bit. We hit about a high of 8% average 30-year fixed mortgage rate in October of 2023.
They’ve come down a little bit. As bond yields have fallen, the Fed has signaled that they’re going to cut rates next year, and that’s encouraging. All of that is very encouraging. The thing is the market, mortgage companies and bond investors who really set mortgage rates are already pricing those things in. So, a lot of the declines that we are expecting or that the Fed is signaling are now priced into mortgage rates, and so we’ve already experienced some of the benefit of what is planning to happen next year. If the Fed stays on course and does exactly what they said they’re going to do, which let’s talk about their track record over the last three years, never happens. So if they do that somehow, then we will probably have mortgage rates right where they are right now, but the Fed…
This signaling is exactly that. They’re not saying they’re going to do three. They’re very data reliant, and so they’re going to change things as they need to, and as inflation and the labor market change. My guess is they will cut rates a little bit, but we just don’t know. So, I think it’s a little early to say that rates are going to get down as the fives. Hopefully they do, but I think that’s a little early to say. My guess is that they’re going to be more stubbornly high than, I think, a lot of people are hoping for.

Ashley:
So, we should buy a house right now, or we shouldn’t?

Tony:
That’s what I was going to hit on too, Ash, because I think what a lot of people are doing right now is that they’re waiting to buy that first real estate investment, because they want to see rates come down to whatever rate. But my thought is that once rates dip, it’s going to be a bloodbath, because you’re going to have so many people that are sitting on the sidelines jumping back into the market, and we could get to a point where people are going 10K, 100K over asking again like it was a few years ago. You can always refinance your rate, but you can’t refinance your purchase price. I can’t go back to the bank, and say, “Hey, I know I bought this for 300,000, but can I actually rebuy this today for 250,” and the bank’s like, “Okay cool.”
So, Dave, what’s your advice to the rookies? Should we be waiting for rates to fall? Should we be pulling the trigger today? What’s your thoughts on that?

Dave:
I generally just don’t believe in timing the market. That’s just like I study this full time, and I don’t know what’s going to happen. I just want to make that very clear. So, I believe more in just buying when you have the time and the financial resources to do it, because at least if you’re like me and investing on a 10 or 20-year time horizon, then you’re probably going to be fine whenever you do it. I do think, Tony, there is some wisdom to what you’re saying that prices… I think there is a good chance that if we rates fall, we’re going to see a very significant increase in competition. I think that is one of the more likely outcomes for 2024.
Not necessarily will happen, but I think there is a good chance that happens. So, buying now when rates are they have come down is wise. I also just think when people talk about “rates coming down,” I find that people have wildly different expectations of what that means. I’ll just say this, I think if we ever see mortgage rates in the three percents in our lifetime again, that I would be surprised, and something will have gone terribly wrong with the economy. I just don’t think that’s going to happen. So, could they come down to the fives? Yes, but realistically, they’re going to come down slowly. So, you have to think about what’s your strike price? Okay, they’re at six and three quarters now. You’re waiting for six a quarter. You’re waiting for five and a half. You could be waiting two years for that.
During that time, who knows what could happen to the housing market. So, I just think ultimately, rates, they do matter. It is important, but they’re on, I would say, a positive trajectory now where we’re probably not going to get back up above maybe in the low sevens. So, if you find deals that make sense, you should go for them. Then if rates happen to go down, you can refinance. I think the two things I always say to people is, one, don’t count on rates to go down. If your deal doesn’t make sense, and you’re like, “I’m going to buy it, and then when rates go down in six months, I’ll refinance. Then my deal will pencil.”
I don’t generally recommend that, because no one knows if rates are going to go down. It’s something that’s outside of our control. The other thing is if a deal makes sense with high rates, then it’s going to make even more sense in low rates. So if you can find a deal right now, you might as well buy it, and then it can only go up from there.

Ashley:
I think where some people got into trouble and could get into dribble is where they’re over leveraging themselves, and then they’re at the point where they have to refinance somehow, or they have to put financing on the property, and when they ran their numbers at the property having a 4% interest rate, and now all of a sudden they have to actually get an 8% interest rate. That has caused a lot of trouble the last couple of years, especially now if somebody went and they were rehabbing a property for a year, and now they’re trying to go and refinance, and the rate is very different from when they bought it. In New York state, here, it can take you three months to actually close on a property, and that’s normal window of time.
So, those three months, if you were buying a property the end of 2021, and then didn’t close until 2022, even right then was starting to make a difference, then you have to rehab your property, and then the rate increased. So, the best thing you can do is make sure you have multiple exit strategies on a property that you’re not over leveraging yourself. You have some kind of backup plan if you are going and needing to refinance. Like Dave mentioned, he’s long term buy and hold most of his investments, where he’s not worried about having to go and refinance and get a rate. If the deal works, the numbers pencil, the day that he’s buying it, what it’s at and what his interest rate is, great. That’s awesome.
You could always go and refinance for that lower rate, but you’re not at risk of having to be told, “Sorry, you’re going to have to pay this higher interest rate.” There’s also five-year arm loans or even seven-year arm loans where your mortgage is fixed for a certain amount of years and then it becomes adjustable. That’s where other people will get into trouble too is that they got this lower interest rate for the first five years, and then when those five years are up, it’s going to adjust. So, we actually did that on one property, where it’s a seven-year arm, and for seven years, it’s like 5.12%, which is a great rate. We got this a year ago, great rate at that time. In seven years, that interest rate could go up to 13%. It has a max of 13%, and then I think a floor of 6%.
That would make just a tremendous difference in someone’s mortgage payment if all of a sudden they haven’t planned for that year seven, and they have to go and refinance, or it goes to that adjustable rate. But even if you’re going to refinance, you’re most likely going to be that high rate too, so having some way to get private money or have the cash to pay that off, things like that. So, you want to look at as to, “Should I invest now because of the interest rate, or shouldn’t I?” It’s based upon what your strategy is, and that’s all basis of today’s episode is start with strategy. So if you’re holding onto that property, who cares?
Like Tony said, you’re going to buy it for cheaper right now with the higher interest rate so that when you go and sell it in 20 years, because you’re ready to go move to the beach, and sell everything, you’re going to have paid less for it than somebody who waited and wanted that lower interest rate, but yet they had purchased their property for more.

Dave:
I think, Ashley, you made a lot of great points. One thing I wanted to second is that people focus a lot on what rates are and if they’re up or down. I think there’s benefits to both, right? It’s more affordable when rates are low. There’s less competition when rates are high. So if you’re a real estate investor, there’s pros and cons of each. For me, the thing I root for, I obviously have no control over things, but if I had my druthers, I’d root for just stability or predictability. I think we’re getting to that point where rates are going to be more stable. That is just what you need to make a decision, because as you said, Ashley, that makes it so that if a deal pencils, and you have to still wait two or three months to close, you have a reasonably high confidence that you’re not going to be looking at a totally different monthly payment than you were a couple of months ago.
Unfortunately for the last two years, year and a half, it’s been really volatile and hard to make decisions. So, even though I’m not sure which way rates are going to go, if they’re going to trend up a little bit, trend lower, I think they’re going to be a lot more stable, and the band of that rates is going to narrow. So, that just makes it easier for people to make decisions. To me, that’s one of the most important things in getting back to a healthy housing market, more than rates going down to 5% or 4%. I think, predictability really matters a lot in the psychology of home sellers and home buyers.

Ashley:
Well, Dave, thank you so much for such incredible insight. We really appreciate having you on the show. Can you let everyone know where they can find your new book, Start with strategy?

Dave:
Absolutely. Go to biggerpockets.com/strategybook. That is where you can find the book, and it comes with all sorts of bonuses. If you actually order it now, but it’s still pre-order, you get a free planner. So, it’s like a journal that goes along with the book, where you can actually develop your own investing strategy and business plan. If you buy that, if you go to biggerpockets.com/strategybook now, you can get that completely for free, which is a great deal. If you use the code strategy 356, you’ll also get 10% off.

Ashley:
Oh, we always love a good discount here on the Rookie podcast. You can use that 10% towards your first investment property.

Tony:
All right, guys, before we wrap here, I just want to give a quick shout out to someone that loves to say five star review on Apple podcast. This person says, “Best real estate investing podcast of all time.” They say, “I listen to this show every chance I get. I can’t wait for the new episodes to air. I always find value in some way, shape, or form. I’m fairly new to real estate investing, and I love when you guys talk about partnerships. You guys always seem to have something I need to hear on a regular basis. I love the podcast. Keep on giving back. I can’t wait to be on your show one day.”
So guys, if you haven’t yet, please do leave us an honest rating review on whatever platform you’re listening to. We’d love to read your review here on the show for the rest of the listeners as well. The user who left that podcast review was Nick@rei216. Nick, we appreciate you.

Ashley:
Thank you so much, Nick. Dave, thank you so much. Another great podcast to listen to is On the Market podcast, so make sure you go check out Dave and his crew as they talk about current and up-to-date information that you need to know as a real estate investor. Today’s episode was amazing, and we learned all about starting with strategy. We went over three of the five things that you need to start. The first thing was personal values. Second was transactional income plan and how to present that, and then also completing a resource audit on yourself.
Well, I hope you guys are an amazing new year so far. I’m Ashley, and he is Tony, and we’ll see you guys in the next episode.

Dave:
Hi everyone. Welcome to On the Market. I’m your host, Dave Meyer. Joined today by Henry Washington, Kathy Fecky and James Daynerd. It’s good to see you all. First time we’re all back together after the new year. Hope you all had a wonderful break. Kathy, did you do anything fun?

Kathy:
Oh, well, I hosted 20 people for four days, so.

Dave:
Wow.

Kathy:
Sure. It was fun.

Dave:
That sounds very ambitious. Well, James, I know you’re in Australia. You’re looking very tan. Glad to see you.

James:
I am not happy to be back. I could have stayed over there in Australia, but I am happy to get on with 2024.

Dave:
And Henry Washington. Henry, did you do anything fun over the break?

Henry:
I did. We actually took the kids to Pensacola, Florida. Every year my dad goes out there and rents a place and then my sisters and her kids fly in and we bring our family and so we all hung out for the new year and had a good time. My sister has four boys and she’s pregnant with her fifth child and I have two girls and I learned that girls and boys are different.

Kathy:
Yes, they are.

Henry:
That energy is impressive.

Dave:
So maybe you’re happy to be back.

Henry:
Yes, it was chaotic in the best way, but it was fun to watch.

Kathy:
You got to watch your breakables for sure.

Dave:
I’m glad you all got to spend some time with your families. And now we’re back to kick off the year with one of our headline shows to sort of cover some of the news that has gone on over the last couple of weeks while people were off for New Year’s. Today we’re talking about four very important and interesting news stories. We’re going to talk about recent labor market data. We’ll talk about the negative sentiment that seems to be pervasive across the American economy, corporations building towns for their employees and the pros and cons of buying a house in 2024. So let’s get this kicked off with our discussion of labor growth. If you haven’t heard, the US economy added 216,000 jobs in December and the unemployment rate held steady at 3.7%. Just for the record, 3.7% is very low. And through 2023, the United States recorded a net gain of nearly 2.7 million jobs.
Now those gains came from different parts of the economy, but mostly came from government, which was 52,000 jobs, healthcare, which is 38,000, social assistance, 31,000, and I was actually surprised to see construction up 17,000 and all of this with a backdrop of wage growth, which is actually a bit of a change. We’ve seen wage growth now up 4.1%, which is now higher than the rate of inflation, just a little bit, but that’s a change from how it’s been over the last couple of years. So Kathy, let’s start with you. What do you make of this labor market report?

Kathy:
It’s more of the same. We’ve had robust job growth all year that has just shocked so many economists and there’s lots of reasons for that. I think one theory, and I agree with this theory, is that we’re just still recovering from COVID. So a lot of the robust job growth was a recapture of the jobs that were lost, reaction to the reopening and as we move forward, we’re going to be, I think, coming just back to normal. So that’s the way I read this. There’s other factors of course, but wage growth being one, that when you’ve got people making more money, they tend to spend and consumers have been spending and that fuels the economy and that creates more jobs, right?

Dave:
One of the theories I’ve heard about this surprisingly strong labor market is this concept of labor hoarding, which is basically that companies are more hesitant to lay people off during this economic cycle than they have in previous because of the really tight labor market that happened in 2021, 2022 when no one could hire. Henry, I know you have people on your team, you work with a lot of contractors, do you sort of see this going on in the economy?

Henry:
I’m seeing the opposite. I’m getting calls from people looking for work. I’m getting hit up all the time by contractors and subcontractors. They want more work, more volume. I was just literally driving down the freeway yesterday going to breakfast, this was Sunday morning and I passed four different construction company trucks out in their work vehicles, so I assume they’re going to job sites on a Sunday. So I was just thinking there’s so much work out there for people. The ones who want the work and are good at marketing are getting the work and the ones who aren’t good at marketing are having to call and try to find people to send them jobs. So I’m kind of seeing the opposite and anytime that I post for a position or an opening or something, we’re inundated with applicants and people wanting to do work right now. And so I’m seeing that it’s like people are hungry for work and there’s work to be had.

Dave:
Well, that’s probably a sign of a good economy. I hope that’s good. People are hiring people taking that job. That’s pretty good. I know the labor market is important for the macroeconomic situation, but for real estate investors, they might not be super familiar about how this might impact them. James, do you follow this closely and how does it impact the way you make your investments?

James:
Yeah, no, I mean the labor market and pricing behind that, it has everything to do with real estate investing in general. I mean so much of what we do is based on the cost of what you need to do to improve that asset, whether it’s a fix and flip rental property or it could even be a large multifamily, it’s about the costs that go in. Those core costs will affect your numbers so much. And to kind of touch on that labor hoarding, I do feel like that is going on in a lot of the construction companies right now because what we’re seeing is we’re seeing, just like Henry said, that people are actually requesting more bid work right now and it has fallen, their workload has fallen. But that’s what the larger companies that have staffed up heavily over the last twenty-four months to keep up with the demand that was going.
Our smaller contractors who don’t need as much work and volume, they are actually are being a lot more stubborn on their pricing. They have not budged as much and they’re still kind of increasing it because they don’t need the work and just because there’s a low amount of work out there, they’re still able to get those jobs. But our bigger companies have been wheeling and dealing much more. Those are our big siting companies, our clearing and grading companies, they have a lot more bodies on staff. These people get paid better too and they want to keep everybody working so they can get through this little blip in the market is what they’re seeing.
And we’ve seen pricing, especially on a new construction, we had one of our clearing and grading contractors, he called us and said, “Hey look, I will do this last portion of this job for free,” because he had so much profit in there, “if you get me lined up with another job right away.” Because he just wants to keep it going because none of them want to lay those people off because hard to find when the market heats back up. And so I do think that labor hoarding is happening, but it’s working to our benefit in a lot of different things with the bigger trades that we have to hire.

Kathy:
To Henry’s point about applicants, our Director of Finance is retiring after 20 years and we just thought, boy, how are we going to replace her? She’s been so awesome. So we put out the job description and we got 350 job applicants for this position and we were really surprised and we were a little bit under, I would say what would be the going rate. And several of those people said we were willing to take less money because we love that you’re a remote company. So that was interesting. I think people really got used to being able to live wherever they want and they’re looking for companies who can provide that.

Henry:
People got comfortable working with no pants, I mean.

Dave:
Are you wearing pants right now, Henry?

Henry:
I mean let’s just not scroll down, guys.

Dave:
Let’s keep the cameras where they are everyone. All right, well super interesting. I think another thing just for investors to remember is that while the labor market doesn’t directly touch housing prices or things like that, it is a good sign for rents, rent growths, vacancy, occupancy rates, those kinds of things. When people remain employed, that is a good sign for income for real estate investors. So we just covered our first story, which is all about the labor market and how surprisingly strong it is and how that impacts investors. We’re going to take a quick break, but after that we’re going to hear about why Americans, despite some robust data, are just so unhappy about the economy.
Welcome back everyone. Our next story is about Americans being displeased with the economy. Now there are a lot of macroeconomic indicators that we talk about all the time on the show that are going well. GDP is up. We just talked about a strong labor market, but Americans have low sentiment and they’re kind of dissatisfied due to high prices. Inflation over the last couple of years has really eroded spending power, housing super expensive, all that kind of stuff is going on. And so I’m curious, what are some of your theories about why the headline numbers look good but people aren’t feeling it? Henry, let’s start with you.

Henry:
I think you really kind of said it. I think we’re in an age of information overload. I think we’re moving away from print news now and it’s all on demand news and everybody’s fighting for the eyeballs, the attention and the clicks and the way to get that is you have to have an attention grabbing headline or story. And so a lot of the stories that you’re seeing are really click baiting and around like, “Hey, the economy’s terrible, housing prices are through the roof and affordability is going crazy and no one can afford to buy a house.” And that’s going to play a role when you have the media painting pictures, sometimes that things are extremely negative.
And I’m not saying that affordability isn’t a problem, and I’m not saying that people aren’t struggling in this economy, there are, but there are people struggling in every economy. And I think if you just want to put a headline out about, “Hey, the economy’s doing pretty all right and let me show you why it’s not as bad as people think it is.” That story’s not going to do as well. And so I think people just really have to educate themselves fully on the issues and dive a little deeper than the headlines. And I think people will start to see that things aren’t as doom and gloom as maybe a news headline might lead you to believe.

Dave:
I read about this Tik Tok trend where people are calling it the silent depression and we can get into that, but the headline was the people were saying that this is the worst economy in US history and I think this is what you get when younger people who are not trained in this perhaps or even look at history, make economic projections. So I wouldn’t follow that particular one, but I think is there something to this? Because the GDP, you look at labor market that sort of looks at the whole pie, right? The pie is growing, but I think there might be something to the fact that not everyone feels the way that that pie is growing equally. Kathy, do you have any thoughts on that and how that might be playing into this?

Kathy:
Yeah, absolutely. My first thought when I just saw the headline and hadn’t even read the article was that it’s social media. That’s the big difference is that everybody has a voice now and before, how could you be heard if you had complaints? Who would you go complain to? Your employer? So everybody has a voice and everybody, not everybody, but yeah, everybody’s an expert now and they think they know everything without a degree in that topic. So not that you need a degree, but maybe some experience would be helpful too, or knowledge or history. But I would say one of the biggest things is that in 1949 there was the fairness doctrine and that was basically a law that required, I’ll read it, that broadcasters cover controversial issues of public importance, that they present contrasting viewpoints and that there’s equal time for both viewpoints, adequate airtime, and that is how, when I had my degree in broadcasting and I worked at Fox, I worked at CNBC and CNN and ABC 7, and when I worked at Fox, there was no slant.
In fact, most of the people I worked with were pretty liberal because it was in California and if we did not show both sides and clearly, boy you’d get chastised and probably fired. Now in the eighties, the fairness doctrine was abolished, 1987 by the FCC, and in 2011 it was just completely removed from everything. So add to it social media and other outlets, other ways for people to get news where it would be really hard to enforce this thing anyway, right? It would be super hard to say you didn’t tweet both sides, so it’s just outdated, but that’s the big difference. There’s always been unhappy people. Now though those unhappy people can see what everybody else has and they get jealous and frustrated. And so it’s just, again, social media, technology I believe is really what it comes down to.

Dave:
That’s a great point about this, you can see how other people are living, and we should also mention that most people on Instagram overinflate their lifestyle and make it look like they’re doing all these glamorous things all the time that maybe they are not. But I also, I’m just curious what you guys think, we are real estate investors, we own assets, we have largely benefited from a lot of the economic growth over the last couple of years, but I can see how young people who don’t own assets, in a lot of ways did miss out on a lot of the wealth creation over the last couple of years. And I think there’s something that is something to be frustrated about.

Kathy:
Yeah, but if you really go back and look at history, home prices doubled almost every decade. It’s not new. And in the eighties it was actually more expensive. It was harder to buy than today, less affordable. So it’s not new, it’s just that people could see more and are frustrated. But even back in the eighties, there were ways to get into the industry if you really want to study it and find out and talk to, listen to BiggerPockets episodes and see how people with nothing suddenly have something. It just takes effort, knowledge, and education, right?

Henry:
Yeah, I would have to say I definitely don’t agree with that, Dave, because if you think about I love seeing the memes that’s like, “Man, I should have bought a house in 2008, but I was too busy playing in the playground.”

Dave:
Exactly.

Henry:
But when you think about that, yes, the young people might’ve missed the opportunity to buy in 2009 when everything was down, but they didn’t miss 2020 when the whole stock market was down and had an opportunity to buy, and they’re not missing right now when it’s a great opportunity to buy real estate and there’s more access to information to educate them on how to make these smart investments. In 2008, you couldn’t just hop on the internet and find an expert in something you wanted to learn about and take action on that information. It wasn’t that easy. You had to go to the library and know the Dewey Decimal system in order to get information.

Dave:
Nope.

Henry:
And so I would argue that it’s easier now for them to take action and there is still plenty of opportunity.

Dave:
That’s a great point. I understand some of the frustration with the economy, but I hope people don’t get completely tune it out. To your point, that’s what’s really dangerous if you just write it off as hopeless, then it really will be unfortunate and you could get left behind. Well, if you’re all wondering where James is, he, as usual is having technical problems, so we’re going to carry on.

Kathy:
Poor James.

Dave:
Henry, Kathy and I for these questions that we’re going to move on to our third headline, which is that corporations in the US are bringing back company towns. This article from the Future Party talks about how Google, Meta, Disney, NBC and several of Elon Musk’s companies are developing “company towns” where people can live and play just a stone’s throw from where they work. These projects are designed to alleviate the high prices and lack of inventory in the housing market. What do you guys think this means? Do you think this is a trend? Do you think this is smart? Henry, what do you think?

Henry:
Is it a trend? I guess you can call it a trend. Is it going to put a dent in the housing problems that the country is facing? No, it’s not, but it’s happening because I am literally seeing it happen in my backyard. Walmart is building a new home office campus facility that’s going to house all of their buildings. It’s going to have housing and hotels and apartments, and so this is happening in more companies than just the ones that are mentioned there.
These companies are fighting for talent, they’re fighting for young talent because if you think about all of these companies, include Walmart in that list, it doesn’t matter what these companies sell. They’re all technology companies. They’re fighting for young technology talent and young technology talent, if you go look at what Google provides currently in terms of office facilities and YouTube, they have beautiful, all-inclusive facilities, state-of-the-art technology. And so I think a lot of it is these companies are all competing for that same young talent, and so if one is providing this thing, they’re all going to start providing those same amenities. So I think it’s less to do with housing and more to do with talent retention.

Kathy:
Yeah, I just want to say Elon, if you’re listening and I know you are, I would love to partner with you on this project. I think it’s incredibly cool. Listen, I have a 24-year-old. She’s living in Denver now in a building that is mostly young people. She loves it. When you get out of college and you’ve been living with young people for four years and it’s so fun and all of a sudden you go and you’re not, you’re in a suburb somewhere. I mean, it’s brilliant to build communities where people can live near work, have a community, social life and not have to commute so far. I love it.
Now, California has been trying to do, this is called the California Forever Project, and it’s in Solana County just north of San Francisco, and they’re trying to create this, but California ain’t the place you’re going to get it through. There is so much resistance in a place where housing is so expensive and you need more supply, they will stop you every step of the way. I know this because we’ve developed property in California and it’s so hard. The resistance is incredible from the very people who actually want cheaper housing. So will it happen in California? I don’t know. But maybe some of these other areas that are more open to development, it could happen and I think it is fabulous. I love it.

Dave:
All right. Well, I’m just going to disagree, Kathy. I have two things to say here. First of all, if we’re trying to create affordable housing in the US, I don’t think Meta employees and Google employees are the people who are struggling to buy houses right now. They’re probably the most highest paid people in the entire country. And the other thing is I just think this is a clear way to try and stop work from home. They’re like, “You can’t work from home, but if you want to hang out with your boss after work, you can do that as well.” I don’t know about you, but for me, I love my colleagues at BiggerPockets, but I like a little work-life separation and I don’t know if I want to go to work, leave and then just see everyone I just saw at the bar and at the school and at the restaurant and at the grocery store. So it’s not for me, but maybe people will like it.

Henry:
For the record, Amsterdam is more than a little work-life separation. You went all the separate.

Dave:
Yeah, I did a six-hour time difference in an ocean. That’s how I took advantage of myself.
I agree with you, Kathy. The general sentiment, when I was out of college, I lived in, it was a small building in Denver, but it happened to be just all young people and it was super fun. I totally agree with that, that idea of building community and having that community. I just don’t know if I would personally move to a place where that community was focused around my job.

Kathy:
Yeah, that’s a good point.

Dave:
James is back. He’s looking like a deer in headlights, so we are going to surprise him with the fourth headline and see what he has to say when we come back from this break.
All right, James is back. We’ve given him a chance to catch his breath. The fourth headline and our last of today’s show is the housing market, pros and cons of buying in 2024. This comes from GOBankingRates, and the key points here are that right now, at least, I don’t know if this applies to all of 2024, but let’s just say right now at this point in 2024, this article points to less competition, there’s slightly more homes on the market, baby boomers are starting to sell their homes. Those are the good parts. And the cons are that prices are still at record high and competition is still reasonably high, and people generally, as we talked about, have some economic concerns. So James, what do you make of that list of pros and cons? Is there anything else you would add to that?

James:
Well, I think the pros are that right now, as you’re looking for a home that you can almost kind of bank that your mortgage cost is going to get lower in the next 12 to 24 months if you buy now, and that is with the Fed’s signaling that they’re going to cut rates throughout 2024 and maybe into 2025. As long as you can make it budget today, that means you just have upside in a house. And that I think is the major pro.
The con right now is just the payments are expensive when you’re looking at a house. No matter what, it costs a lot more. I mean, I just closed on a new house for myself, what, three, four months ago, and the monthly payment is shocking, but I know when rates come down maybe 2%, my payment’s going to fall nearly 15% on what I’m going to be paying right now. And so as long as you can afford it today, then you can actually forecast down the road for the budget easier.
The benefit is there’s opportunities in certain areas. If you can buy something that’s a little bit dated, the pricing is substantially less. And I can say that because I just bought a home in Southern California, which I would never be able to buy 24 months ago without multiple offers. Now, this property did have multiple offers, but it had multiple low offers and it sold about 10, 15% off list. Most of the offers were about 20% off list. So there is opportunities as long as you can wait it out and you can go through that slow transition through life of buying a property below market, renovating, increasing it, and then getting that payment down when the rates start to fall.

Dave:
That’s a good point. Henry, what do you think?

Henry:
Boy, oh boy. James is absolutely right. The pros here, all right, and the additional pro is yes, if you buy now, 45 days ago, people were buying and they were hoping that rates come down at some point in the next year or two, but now it’s more, you don’t want to say guaranteed until it happens, but now there’s more certainty around the fact that that’s probably going to happen. And so you know that if you can get in now and afford it that you’re going to be able build wealth, you’re going to be able to bank some appreciation, right? It’s almost forced by the government. And so you have this very, very unique opportunity.
What I would argue on this list is it says the cons and that the cons are that housing prices are high and that con that housing prices are high, is a con based on history. But if we look at the future, housing prices are low because if and when those rates come down and the demand in the market for homes increases, then the values of those homes go up. And if the values go up, then the prices are higher than they are now. So I would argue that now you can get in and you can buy where you can get a home at a lower price point and with less competition and capture some equity when the rates drop.

Dave:
That’s a great point, Henry. And I’d also say that record, homes aren’t record high in every market. There are definitely markets where they are below all time highs. And that just adds to what Henry and James were just saying, is that in some markets, you actually can get a discount. Now we’re all talking about these things, playing devil’s advocate, it’s going to be hard for any of the four of us to disagree that it’s probably a good time to buy. So Kathy, I’ll ask you this, do you think the, let’s say the first quarter of 2024, do you think that’s going to be the best time to buy this year? Like right now?

Kathy:
Wow, I don’t know.

Dave:
Henry’s nodding vigorously while Kathy’s speaking, just so everyone knows.

Kathy:
I don’t care. I look at the numbers, right? I look at the numbers, it either works or it doesn’t work. But here’s the question I would ask you if you’re renting and looking to buy and feeling frustrated is how frustrating is it to pay rent every day to somebody else who is taking that money and paying off their mortgage? So which one do you want to be? Do you want to be the person who is paying for your living and in 30 years now you have no payment? Because all of that money has gone into your living. You’ve paid off your loan. And the same if you buy a property and a tenant is paying off your debt for you. So you just have to ask yourself that question, what’s better? In 30 years, do I want to still be renting? And what do you think rents are going to be in 10 years, 20 years? What do you think home prices will be in 10 or 20 years?
Now, you have to hold, remember, if you’re looking to buy a home and you think you’re going to be there a year or two, maybe not. But if you’re going to buy it and live there for a while and raise a family, or if you’re going to maybe live in it for a little while and then leave it, but rent it out, doesn’t matter. It doesn’t matter. Because I ask you to just go on FRED, just type in FRED, that’s the Federal Reserve of St. Louis, and type in existing home sales numbers and look what home sales or prices, I’m sorry, prices, not sales, existing home prices and see how they’ve gone up every decade, usually doubling.
And I’m talking about, I’ve been around a while you guys, decades, and I can tell you that the house that I grew up in was $50,000 in the San Francisco Bay area. The next year it was 100, the next decade was 200, it doubles. So why would that suddenly stop? Tell me why. I don’t know. I don’t have a good reason. I think the government isn’t going to stop printing money. So you can make the choice, keep paying rent or pay it to yourself and pay off your mortgage.

Dave:
All right. Well, thank you all so much. This is a very thoughtful and interesting conversation. Hopefully everyone learned something valuable that they can apply to their investing situation themselves. And if you did, please make sure before you go to leave us a five star review. It’s the beginning of the year. We want more reviews. I’m going to be honest about it, and we really appreciate it if you took a minute and went on either Spotify or Apple to give us an honest and hopefully good review if you like this show. On behalf of Kathy, Henry and the ghost of James who just disappeared from our recording studio again, we appreciate you listening and we’ll see you next time.

Speaker 5:
On The Market was created by me, Dave Meyer and Kalen Bennett. The show is produced by Kalen Bennett, with editing by Exodus Media. Copywriting is by Calico content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

Henry:
What’s going on everybody? Welcome to On the Market podcast. This is Henry Washington and I am here with Kathy Fettke and I am introducing the show because Kathy and I are here to celebrate Dave Meyer’s new book, Start With Strategy.

Kathy:
Yeah, whoo-hoo.

Dave:
Thank you. Thank you guys. I appreciate you doing this.

Kathy:
Well, I think Henry and I want to understand how you’re able to come out with another book after giving an amazing keynote that I know took a lot of preparation, and a year-end completion and forecast. I mean, how do you do it?

Dave:
Just deep-seated anxiety about being inferior and not accomplishing enough. I don’t know, if you want the real answer.

Kathy:
You can put those fears to rest, I think.

Dave:
Oh no, I’m just joking. I’m lucky that I really like what I do. I really enjoy being a real estate investor and in my job at BiggerPockets and on this show, I get to talk a lot about data and market research, but I’ve also been a real estate investor for more than 13 years, and in the course of those 13 years, I’ve learned a lot about how to develop a strategy that works for me and my particular lifestyle.
For those of you who don’t know, I live in Europe, so I have to adjust my portfolio accordingly. I’ve gone to grad school, I’ve done all sorts of different things throughout my career and I’ve had to build a portfolio that is conducive to the things that I want and my particular goals. And so I decided to write this new book, Start With Strategy, to help people no matter what your background is, figure out what real estate investing strategy is right for you and put together an action plan to go out there and achieve it.

Henry:
I think this is amazing, because as someone who was new not that long ago I was one of the people that asked, how do I get started and what should I do? Not realizing that there’s no one-answer-fits-all for someone starting out. It really is dependent on you, where you’re currently at, what your goals are, where you’re going to invest. And then now as someone who is asked that question by people, it’s really cool to be able to have a place to point them to and say, this is how you go figure that out, so kudos to you.

Kathy:
And for somebody like me who’s been investing since before either of you were born I think, no 25 years ago-

Dave:
I don’t think that’s true.

Kathy:
Well, let’s see, you were in preschool maybe, but even so strategies change and you can have a plan and then 2008 wipes it all out and you got to start over and make sure you’re on course. Again, so many people just have their nose to the grindstone and forget to look up and make sure they’re still on track, or they even know where they’re headed. Why am I doing this? So many times people just flip, flip, flip, flip, forget to invest some of that money.

Dave:
Well, thank you both. I really appreciate it and I think anyone who teaches real estate or has been around this industry long enough, understands the idea here is that there is no right strategy. And that’s one of the main premises of the book is that there is no right strategy. There’s only the right strategy for you. Just like there’s no right perfect market, there’s only the right market that works for you in your particular situation. And so the book helps you figure out what your personal goals are and then matches you with the right strategies and tactics to help you get there. So we’re going to talk all about some of the frameworks and give you some really good information even if you don’t read the book about how to identify a good strategy.
But if you do want to check out the book, go to biggerpockets.com/strategybook and we are doing a special pre-sale. So if you actually buy before the launch, you’re going to get a free strategy planner. It’s a workbook that helps you actually create a plan. It’s like a business plan and you can write it all out in this planner, so you would get that for free. You’re also going to get live group coaching calls and all sorts of other bonuses. So make sure to check it out at biggerpockets.com/strategy. If you want to grab the book, make sure to use the code, START177, that’s START177, because that will give you 10% off the book and all the bonuses.
So to me there are basically three big broad elements that comprise real estate investing strategy. The first one is vision, which is basically where you’re trying to go and what you’re trying to accomplish. Because I’m sure as you two know, there are very, very different goals. Some people just want to modestly improve their financial situation, other people want to be tycoons and everything else in between. Some people start with modest means. Some people start with more means. And so I think the first step in strategy is establishing that vision.
Next, once you have a vision and know where you want to go, that’s when you pick what types of deals you should be pursuing. I hear people all the time be like, should I get into short-term rentals or flipping? And I’m like, I don’t know. I don’t know what you’re trying to accomplish. And so that’s why vision comes first and then what I call deal design comes second. And one of the things I love about real estate so much is that whatever your vision is, you can design deals that will work for you regardless of what your vision is.
And then the last step after vision and deal design is portfolio management. And I think this is one of the least discussed parts of real estate investing strategy, which is what do you actually do day to day? I know we all love to talk about buying deals, that’s surely the sexy part of it, but what about allocating your resources or mitigating risk or deciding if you should sell or refinance or how you’re going to scale? So if you combine these three things together, vision, deal design, portfolio management, those are the three things you need to create a personalized strategy that will help you reach financial freedom, whatever that means to you. If you guys are cool with it, I’d love to just go back and go through each of these vision deal design and portfolio management one by one. So let’s just start with vision. Does this sort of concept resonate with you, Kathy?

Kathy:
Oh, my gosh, a hundred percent. Our visions need to be looked at every year. So read this book every year in January maybe ideally, to revisit do I have the same vision? Because we change, we grow. When you’re single, you might have a different vision than when you’re married, and then when you have children, and then when your children are gone. And there’s so many phases of life, so revisiting the vision, it’s not stagnant. It changes all the time, not all the time, but over time. Like right now, one of the visions I have is, I’m not so interested in owning little rental properties all over the country anymore. I’m consolidating some of that and doing vacation rentals so that my family can get together and use those together, because my top priority is family time, but also to make income. So again, I wouldn’t have done that 10 years ago, because I was buying those little houses to get to a point where I could do this now.

Henry:
Yeah, Dave, I love that vision comes first for a couple of reasons. One is, I think a lot of entrepreneurs in any industry learn the lesson later after they’ve started their business, that they should have designed their business around the life they wanted to live and not design their business around how much money they want to make doing that thing. And so you become this entrepreneur and you end up becoming a slave to your business, because all you were focused on was growth and making money, when really what was truly important to you was being able to make money but not at the sacrifice of the time that I want to spend with my family.
And so when you think about on the front side what that is, if you want to prioritize time with your family, well then that will dictate the types of investing maybe that you should get involved in, or it will dictate the amount of processes and procedures you need to put into your business. So it may be harder for you to get to that money because you’re putting in so many automations on the front side, but the end result ends up in you living the life you want to live. And you can’t do that without a vision first.
The other thing I love is that personal values is the first question. Defining what those values are to you and letting that be a guide. And then I love that the first question is, what are your values? And the second question is, okay, but how much money do you have? Let’s be realistic about it. Let’s be realistic about how we’re going to approach this.

Dave:
I think it’s really important. People in real estate often call it finding your why. I call it personal values. But this might seem a little woo-woo so Kathy it’s right up your alley, but it’s not because every Fortune 500 company has values too. And if these companies, huge corporations, think it’s important to start with their vision, their values, then you should be doing the same thing. Real estate investing is entrepreneurship, and you should be investing with these end goals in mind. Just like Henry said, I’ve never flipped a house. I don’t know if I ever will, because it’s just sounds really annoying to me to be honest, and I just don’t want to do it. I have a pretty hard and fast rule that I try to keep my real estate investing at 20 hours a month or less.
You guys were joking about how I write books and write articles and stuff. Well, I’ve made a very conscious decision to not allow my portfolio to take up a huge amount of my time, because I have other professional interests other than investing in real estate. And so I think it’s really, really important, although it doesn’t sound like investing, to really get a clear idea of why you’re doing this and what you’re trying to accomplish.
And then to Henry’s point, then you got where the rubber meets the road is, all right, what do you got? And I think the key thing about the book is yes, we need to know how much money you have, but I go into this in the book, but money is not the only resource that you can commit to realize your vision. There’s also time and there’s also skill. When I got started, I had zero money. I was waiting tables. I literally didn’t have a bank. All my money was in my nightstand in cash and I had no skills whatsoever. But I had a lot of time. I had a lot of time where I could go look for deals and run the numbers and network, and I used that to start my portfolio.
And the point of the audit part of the vision where yes, you do talk about how much money you have, is you need to figure out what you can bring to your portfolio. Because you don’t need to have money, you don’t need to have time, you don’t need to have skills per se, but you do need to have one of the three. Sometimes you hear people like, I’m really busy, I’ve never invested in real estate and I don’t have a lot of money. How do I get started? Unfortunately, you can’t under one of those situations. So you need, as part of your vision to figure out which of those three resources you’re going to contribute. If you don’t have money, that’s fine, but you’re going to need to spend time on your portfolio. If you don’t have time, that’s okay, but you’re going to need to have money, you need to bring something. It’s literally a law of physics that you can’t create something out of nothing. And so what is the something you’re going to bring to your portfolio?

Henry:
So your book just doesn’t teach us how to hit a button and then we get properties that make money.

Dave:
I really wish it did. I wish there was a button that just wrote a book for you. That would be very easy too.

Henry:
I would buy that right now.

Kathy:
Having the vision actually makes the action part happen. I’ve had so many people come to our meetings at Real Wealth and they had no money and no time, and I just said, but just keep coming, keep learning. So they had obviously enough time to learn and to attend events and talk to people. And then they started to see the opportunities. They started to change the way they think. So the more that we get clear on that vision, the more you’re able to see that opportunity, and I can tell you people that I would look at and say, man, I don’t know how they’re going to get started, and then the next year they would somehow make it happen. They would either come into money, maybe there was an inheritance, maybe they got a new job, maybe they got a side job. So it’s like the education, that might even be above vision, right?

Dave:
Absolutely. But I think the point, if you have a vision and you do this audit where you look at your time and money, then you can identify your weaknesses. If I had done these audits when I first started, it would look pretty grim. I didn’t have a lot of resources, but I was still able to get clear about what I want. And that provided the motivation to get those resources. I did work a side hustle, I did educate myself to learn the skills, which is the third resource that I could contribute, because ultimately you have to get specific.
And I think there’s a tendency for people who are just getting started to be like, I just want a bajillion dollars, or I just want to quit my job. And in the corporate world, we do a lot of things about goal setting or smart goals or OKRs, these type of things where the point, the philosophy is, that the more specific you get about the goal, the more likely you are to achieve it. And I think that’s super important here. So don’t just say you want a billion dollars. If you do want a billion dollars and that’s a carefully thought out number, fine. But I think for most people it’s somewhere less than that. And what you’re actually after is not necessarily money, but it’s some lifestyle that you’re envisioning and so go write that out.
For me, I’ve always just wanted to travel a lot and real estate has enabled that to me, because I set that as a goal back in 2016. I said, I wanted to move abroad and I created a real estate scenario that worked for me. And you can do that by creating a very specific vision, whatever it is. I really think there are real estate strategies that work for you, but you have to spend the time and do some soul-searching honestly to think about why you’re actually doing this.
All right, so after vision, that’s when it comes to what I call deal design. And I think this is the part where people think it’s very fun, but this is where you align the different types of real estate investing out there with your specific vision. And I called it deal design for a very purposeful reason. People often call it, finding a deal. And I do think that there is obviously a big part of real estate investing that is identifying properties that you should buy. But I call it deal design because I just love this about real estate that there’s so many different levers you can pull to create a deal that works specifically for you.
Even if you know want to buy a rental property, how you manage that rental property, how you finance that rental property, what market you buy it in, what class is it in, what business plan you use to operate it, are all different ways that you can adjust this particular deal to fit your vision. And so in the book it goes through deal design and it basically explains the pros and cons, trade-offs of different types of real estate investing and helps you align with what your vision said.
I’m curious what you guys think about this. Henry, I know you do a whole bunch of deals. How do you think about designing deals that are going to work for you in your long-term strategy?

Henry:
It’s essentially what I did without knowing I was doing it, when I got started. What I wanted to do when I got started was to solve the problem of helping people find deals, because that was my safety net, if that makes sense. I knew if I could get really good at finding deals that I would be able to then keep the ones I really like, but then solve a problem that every investor says they have, which is it’s hard to find deals. And so it forced me to design my business in a way that was going to bring me those good deals and then that allowed me to do exactly that. I could then monetize these deals in the ways that I wanted to, that fit my investing strategy.
My investing strategy just happens to be long-term buy and hold, and fix and flips where I feel like I want to do that. But it all came from me designing my business in a way that was going to bring me the things that I wanted. And so it all turned out to feel like it was intentionally done, because the plan was upfront.

Kathy:
Listen when you get started, and I don’t know how many people listening are just starting or already have their strategy, but I can tell you when I started, I was so overwhelmed with excitement and overwhelm confusion, because I would go to local REA events and I would hear one guy talk about multifamily, and then the next week it would be a flipper, and the next week it would be a note guy, and then the next week… It was so many ways to make money and all of them are so sexy and all the speakers were so successful that I just wanted to do it all. But that’s not the way to go. Start with a strategy that you most understand or that you’re most excited about, and get really good at that and then you can go onto the other ones. Because it’s so easy to jump in these things that look great, but maybe you don’t understand enough and that’s when the strategy doesn’t work.
I, for some reason, I don’t know the 10th event or whatever, I heard this guy talk about his single family rental portfolio and I was like, I can do that. There was something about it.

Dave:
That’s the one.

Kathy:
That’s the one and it was the one, it still is the one. I’ve done lots of other things, but it’s a great time to be in single family, especially today, so it resonated. But go and find out about all the different strategies and then pick one.

Dave:
That’s a perfect anecdote, Kathy. I think so many people want to consider every possible strategy and that is just so overwhelming. There’s actually this great book I read called The Paradox of Choice. I won’t get too far into it, but it’s like basically everyone thinks they want a lot of choice, but when you get presented with a lot of choice, you just freeze. And it’s just one of the reasons for analysis paralysis.
And so I think the real point of the deal design phase of strategy is narrowing down all of those amazing options. And there’s no right or wrong, there are so many great options, but narrowing them down for just the ones that fit your vision and that as Kathy said, you can reasonably execute on. I totally agree with you, Kathy. Being a host of a podcast, we get to hear from the coolest people ever talking about the coolest stuff that they’re doing all the time. And every time I get off this podcast, I’m like, dammit, I should be doing that.

Kathy:
Why am I not doing that? Yeah.

Dave:
I have to ground myself a little bit and be like, okay, no, I can’t go out there and do what Henry’s doing or Kathy’s doing or any of our guests are doing. They’re not me. They have different circumstances and I got to stick to the plan that I’ve put in place.

Kathy:
A hundred percent. There’s so much FOMO in real estate, especially when you see all these things on Facebook and Instagram.

Dave:
Totally. Yeah, I mean this is a whole nother point, but I just think one of the reasons I wrote the book in general is just like, you’ve got to run your own race. You hear all these people telling you, you got to do this strategy or this is the only way to make money, and it’s honestly just nonsense. There are plenty of ways to make money, as long as you just dedicate yourself to being good at the things that you do and you actually want to do them, you’re going to do all right.
All right, so the last step of portfolio strategy after vision, which is where you want to go, and then deal design, which is like the how. Vision’s like where you want to go, deal design is how you’re going to use real estate to get there. And then portfolio management is like, what should I do and when should I do it? And where should I be doing it? Where should I buy deals? What does my buy box look like? Should I be selling, refinancing? Getting into the nitty-gritty of managing your portfolio.
And for me, this is the thing that took longest to get good at, or at least disciplined about in my real estate investing career. I was very focused on buying stuff. Everyone always asks, how many doors do you have? They don’t ask, do you have proper risk mitigation practices in place or anything like that because it’s not sexy, but it is super important. And people always want to know, should I buy, should I sell, should I refinance? And really these things come down to the same ideas. What are you trying to accomplish? What is going on in your portfolio? And so in this part of the book I created an entire Excel workbook that you get for free as part of the book that helps you track your portfolio and see how well different deals in your portfolio are doing, and give you some information to make these decisions. Do you guys look at your portfolio on a regular basis? Kathy, just curious, how often are you looking at what’s going on and how do you use that to make decisions about what you’re doing each and every day?

Kathy:
So coming back to the beginning, it’s like it’s so important to know who you are and what you’re good at. And I’m fortunate enough that I’m married to a man who loves to put together spreadsheets and analyze. So as a couple, and we try to teach people this all the time, especially couples, sit down once a week and look at your portfolio together. Hopefully one of you is a spreadsheet person. If not, get a bookkeeper or someone who is and sit down and look at it.
Rich and I once a week, we spend an hour look at our portfolio, look at asset protection. Do we have the right trust in place? Do we need to have a meeting with somebody to make sure? And then all that stuff doesn’t come up on date night, then date night could be date night and don’t talk about these things. But absolutely, yeah, we try to look at it every week because you can lose sight of, wow, I really have a lot of equity in this. It’s just dead equity. I could put it to you somewhere else. I mean, life changes quickly. Got to look at it regularly.

Henry:
Yeah, that’s exactly what I do. I look every week at my portfolio. Part of that is because that’s when I have a staff meeting every week, and so it forces me to look at the ongoing projects that we have. But that also gets me looking at my rent role and gets me looking at the property management reports and seeing vacancies and how all that’s being managed. So every week we’re taking a look at the portfolio as a whole, both on what we are owning and keeping and what we’re actively turning over. I

Dave:
I love that, because even if you only have two or three properties, sometimes you get so fixated on one that’s maybe a problem property, you’re spending all of your attention there and you’re missing opportunities or risks in other parts of your portfolio and you don’t recognize it. It’s not just about identifying vacancies or things. As Kathy said, sometimes you realize there’s equity trapped in a property that could be deployed elsewhere.
That’s actually, Kathy, why I started doing this tracking and created this spreadsheet. When I first started investing, I bought this four unit in 2010 or ’11 or something and I was so proud of how much equity was in it. I was like, oh my god, when I sell that one day I’m going to make so much money. And for three or four or five years I was like, this is going to be amazing. And then I joined BiggerPockets full time and I realized, oh my God, I have just been wasting all of this money. I could have bought all these other properties. I could have been using my resource so much better. And it was sort of this awakening that I committed to myself that I was never going to get caught in that situation again. So it’s not just about the boring stuff of looking through reports, it’s about finding opportunities and where your portfolio can continue to get better.

Henry:
I completely agree. I talked about this matter of fact at the BiggerPockets conference, I think it was Lika who had brought it up. The whole point was we were talking about deals and getting more deals, and one of the points that was made is the whole point of getting deals is to produce more income, build more wealth. And there’s not enough people talk about growth in terms of managing your current portfolio and seeing what optimizations you can make within that portfolio. And especially in a time like this where it may be more difficult for you to get that monthly cashflow, but what if there was some small updates you could make to existing properties that allowed you to get more rent and that allowed you to create more cashflow in your existing portfolio. Is that money better spent doing that than going out and buying a property where you’re probably going to break even right now at a 9% interest rate? So without having a vision and a structure and a portfolio management sitting right in front of you, it may be harder for you to do that.

Kathy:
I mean, that’s how our whole business even began, is I live in California and I would talk to people when I would go to those RIAs at these events and people would be like, oh, what do you mean you can’t cashflow in California? I cashflow. I’m like, how? Oh, we have the property paid off. Okay, I’m so glad to hear that you’re cashflowing.

Henry:
That little tidbit.

Kathy:
Exactly. But I’m like, but I’m buying all these cashflow properties in Texas and your property is a $1 million in California, but making $3,000 a month and you could triple that. You could triple your cashflow pretty much overnight. So portfolio management has been my thing for, again, 25 years because I’d scratch my head and be like, people aren’t counting the equity as money.

Dave:
Totally.

Kathy:
Right? Yeah. You wouldn’t put that much money down on a property and think it’s a good deal, but somehow because it’s there and you didn’t, that it doesn’t count. I don’t know.

Dave:
Yeah, absolutely. I think it’s such a good point. Imagine you had 50 grand, maybe you could use that as a down payment on a property that might get whatever, 2 to 3% cashflow right now in most markets if you’re lucky. But maybe you can add an ADU or finish out a basement or just do a cosmetic rehab that’s going to increase rent and pay yourself off relatively fast and you can actually earn a better cash on cash return by putting that money into your existing portfolio, than you would acquiring something new.
And I know this took me a long time to figure out, because we, in the real estate industry, people talk a lot about doors and honestly, I just hate that. I think it’s so crazy that people focus so much on doors, because you can have a lot of crappy properties and have a lot of doors. And honestly, some of the people I know who have fewer doors are making a lot more money, because they’re extremely efficient with their properties and they’re very good at operating their businesses. So I don’t know, I’m going on a diatribe there, but I just think managing your portfolio, being very aware of what’s going on in your portfolio is going to really help you achieve your goals. Honestly, with less work, it’s going to make less headache and make it easier for you throughout your investing career.

Kathy:
I just want to jump in and say that you nailed it, that a lot of times it’s something else driving people, like ego versus the actual vision. And that ego for so many years was, I have hundreds of doors. And you’d go to these events and people felt bad if they’re like, well, I only have 20. I must be a big loser. But then you find out later that these people maybe just invested in a syndication. They don’t own 50 doors or 1,000 doors or-

Dave:
Exactly. It is such nonsense, yeah.

Henry:
Real estate investor mass.

Kathy:
It’s a lie.

Dave:
That’s actually one of the reasons I wrote the book is at one of the BiggerPockets conferences, someone came up to me and was like, Hey, I’m just a newbie. I only have 37 doors. And at first I was like, are you freaking crazy? You’re more advanced than 95% of the people here. But honestly, it kind of made me sad. I was like, man, you’re sitting here having accomplished a lot that more than most people ever will, and you’re feeling apologetic about that or some reason that you haven’t accomplished something.
And it just makes you realize it’s driven by ego, because I’m sure that person is probably doing well financially. And hopefully maybe this part of this book will normalize the idea that you don’t need a certain amount of doors, you don’t need a certain amount of time, you don’t need anything in particular. Whatever it is that you want, just go pursue it and find the real estate investing strategy for you. But don’t go pursue a ton of doors just for the sake of it, because honestly, I could buy a lot of doors right now and it would probably worsen my portfolio performance than if I just focused on what I got or remained really disciplined to what I’m trying to accomplish.

Kathy:
And what you’ve been accomplishing is travel. You just got back from Thailand, so pretty cool. I would say you’re on target.

Dave:
Exactly. Exactly. My real estate plan is working. I’m proud to say that. All right, well thank you both so much for coming here and talking about my book. I really appreciate you taking the time.

Kathy:
It’s really cool and it’s going to help a lot of people, so I’m glad we could talk about it and share it.

Henry:
Yeah, thank you. It was a fun exercise to go through. I literally have it sitting up. It’s been opened on my screen for a few days and it’s really cool to just have all these metrics right in front of you in an organized way, so I think it’s going to help a lot of people.

Dave:
Awesome. Well, thank you. And if you are interested in building your own real estate investing strategy, getting all the frameworks and exercises that walk you through all the important decisions that you need to make as a real estate investor, make sure to check out the book. The presale is still going on. You get all those goodies that we talked about at the beginning, and you’ll also get my eternal gratitude for buying my book. If you want to grab the book, go to biggerpockets.com/strategybook, and when you’re there and checking out, make sure to remember to use the code, START177. That’s START177 because that will get you 10% off the book and all the bonuses.
Thank you all so much for listening. We will be back in just a couple of days with our normally scheduled episode of On The Market.
On The Market was created by me, Dave Meyer and Kailyn Bennett. The show is produced by Kailyn Bennett, with editing by Exodus Media. Copywriting is by Calico Content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

Mindy:
Today’s show is about a 36-year-old online entrepreneur who started his entrepreneurial journey after amassing $150,000 in savings in his 20s working in the gaming industry and as a financial advisor.

Scott:
You are going to learn the power of what a baseline level of frugality coupled with using that frugality to empower you to take calculated risks, also known as testing hypotheses, what that can do to turbocharge your success and allow you to build a business that reaches millions of people.
And while you might not be able to become the next YouTube star, you can certainly replicate our guest Humphrey’s formula for success. And we hope that you come out of this with some ideas for hypotheses that you can and will test in 2024.

Mindy:
Hello, our dear listeners, and welcome to the BiggerPockets Money Podcast where we interview Humphrey Yang and talk about his path to over a million YouTube subscribers and a successful content business. Hello. Hello. Hello. My name is Mindy Jensen, and with me as always is my “makes money both on and off the internet” co-host Scott Trench.

Scott:
Thanks, Mindy. It’s great to be here with my “always has a World Wide Web of opportunities to make money” personal finance co-host Mindy Jensen.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe that financial freedom is attainable for everyone no matter when or where you are starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate, or start your own nine or 10 businesses, with most of them failing and one succeeding, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
Without further ado, let’s bring in Humphrey. Humphrey Yang is a former financial advisor turned YouTube financial superstar. With over 1 million subscribers, Humphrey shares video explainers breaking down complex financial concepts and telling stories about the tech and finance worlds. Humphrey, welcome to the BiggerPockets Money Podcast. I am so excited to talk to you today.

Humphrey:
Awesome. Thank you for having me, Mindy and Scott. How are you?

Mindy:
We’re doing good. I’m doing good. Scott, I shouldn’t talk for you. How are you doing, Scott?

Scott:
We’re doing great. Humphrey, we’d love to start off with hearing a little bit about your upbringing and what your family’s relationship with finances was like growing up.

Humphrey:
Oh, yeah. So I got a lot of my personal finance, I guess, interest from my dad. My dad grew up very poor in China. And my dad’s really old also. So this is a fact that some people know maybe from the channel, but my dad’s in his 90s now. And so he actually grew up during a really rough time at the time that was in China, and he grew up very poor, without any money to even buy food some days.
And so for him, I think he immigrated to the United States when he was in his early 40s, I believe, after a stint in the Air Force and flying for some airlines. Excuse me. And money has always been an interesting subject because I feel like my dad views it in terms of a scarcity mindset. So in his view, having money meant safety, which meant he never had to go hungry again. And he didn’t want his kids to experience that.
And so throughout my entire upbringing, money has always been a pretty central topic in just conversation, like this is why you need to save all your money. This is why you should not spend money frivolously. This is why you should be frugal. Because you never know what’s going to happen. This is why you don’t really want to get into debt because debt can erode your money. And if you make a few mistakes, you could lose it all.
And so for us, growing up, me and my siblings, it’s always been like we view money from a scarcity mindset. And I’m now trying to reprogram myself to more of an abundance mindset if you will, because I also am probably more risk-averse than your average 35, 36-year-old because of what I’ve been taught from my parents.
I feel like money is usually a subject that you learn from your parents and your family. So for me, I need to break free from that mindset in particular.

Mindy:
Do you find yourself being more frugal because of your upbringing or more spendy because of your upbringing?

Humphrey:
Definitely more frugal. So, usually, if I’m going to buy something, I always think about do I actually need this item? Will this item actually fulfill my needs in some sort of way?
And if the answer is even a shadow of a doubt a little bit no, then I might hold off on that purchase, at least for 24 hours, sometimes up to a week. And then I see if I still want it after a week or maybe even a month. And if I ultimately still want that thing, then I will go and buy it. But if it’s not a huge necessity, I oftentimes just don’t. I just opt for not buying it.

Scott:
Humphrey, did this mentality around frugality translate to a rapid accumulation of wealth in your college years and right afterwards?

Humphrey:
Yeah, I would say compared to my peers, yes. I always think I could be better, obviously, and it also depends on how much money you’re making. But that’s all wealth is; it’s just the difference between how much you spend versus how much you make. And if you’re able to accumulate a big difference of that and invest it accordingly, then you are going to become wealthier than someone else might be if they’re spending the majority of their income.
So I would say yes, I think that… I still go into it these days with… If I make $10, I try to only spend $2 to $3. Obviously, that’s sometimes not very realistic because rent is so expensive, food is so expensive, and all these things.
That’s my goal, that’s my ultimate target, but oftentimes it plays out a lot higher. I might spend seven of those 10 dollars. But the idea is that at least a 30% savings rate is still way higher than the average American does. I like to view any savings percentages over 15% as a win. And so if I’m overshooting my target, I’m going for eight and I can only save four, it’s not the end of the world. Right?

Mindy:
So do you feel like you’re depriving yourself of things? Do you wish you could spend more and feel guilty when you do? She asked as though that was her exact same story.

Humphrey:
Yeah. There’s a lot of things that I could spend money on. I’m going to Phoenix this weekend. I could have bought a first-class ticket, but I decided to choose economy instead.
Or I can eat a $30 lunch every day if I wanted to. I’ve done the math. I can spend $30 on lunch every day and not have to worry about it, yet I go to Chipotle or I go somewhere that’s really cheap because I know it’s easier, or I make food at home because it’s going to save me X amount of money.
Sometimes it’s just like, I like to not spend money because it’s more fun that way. I don’t know why, but that’s the deal, I guess.

Mindy:
It’s a game. It’s a game, and you’re like, “Ooh, how little can I spend today? How little can I spend this week?” You play these games with yourself because when you’re saving money, then that’s better, according to these frugal rules that we tell ourselves and that our parents tell us as they’re raising us in frugality.
Because I’m a grandchild of the Great Depression, so kind of a similar situation with your dad. I also don’t spend the money that I could spend because why would I? I could just save it instead.

Humphrey:
The other thing is that sometimes you have to think about why you’re saving. And so sometimes I’m irrationally frugal. It’s like, okay, I’m not going to take it with me when I pass away, so what’s the point half the time? But I feel like I still have so many more years left in my life, knock on wood, that I’d rather save it for now. So let’s see where I can get to.

Mindy:
Okay, so how do you break out of that mindset? Have you tried to break out of that frugality mindset and spending on things? This is a work in progress for me too.

Humphrey:
Yeah. I think a really good exercise is to… I put in a Google Sheet or a spreadsheet what my dream spend is per category. So if I didn’t have to worry about money at all, how much would I love to spend on every single category?
Do I want a $7 coffee every day? How much is that going to cost me? Do I want a $30 lunch every day like I just talked about? How much is that going to cost me? Dinner, I do the same thing. How much money do I want to spend on clothes? And oftentimes what you’ll find is that you don’t actually need that much money to hit your dream spend, or it might be closer than you think.

Scott:
I try to spend a percentage of the passive income that I’m generating and save essentially all of the active income. That makes me feel good and sleep well at night. That probably resulted in way too much sacrifice for the first 10 years of that journey, but that’s because I’m very hardcore and have that kind of mentality.

Humphrey:
That’s amazing. So, basically, you’ve gotten your passive income to a point where… Is it your fund money or you’re just completely living off of your passive income now?

Scott:
I spend less than my passive income, the passive income that I generate. I just also work this full-time job many hours a week because I love it here at BiggerPockets, perhaps like you with your business. You’re a highly successful entrepreneur.
And one of the reasons why I wanted to ask about the frugality and spend so much time here on this is because I believe, I have a hypothesis, I like to test, and you can tell me I’m wrong, that there’s a huge interplay between this long-term habit of frugality and discipline with your spending and the opportunities that have been presented to you in the twists and turns in your career. Can we hear about it and let me know if that’s close?

Humphrey:
Are you saying that the long-term compounding of frugality leads to better opportunities or are you saying that it affords you better opportunities in a way?

Scott:
Both. I think it allows an opportunity, for example, to start a YouTube channel to be an opportunity and not a risk.

Humphrey:
Yeah, I definitely agree. All the risks I’ve taken in my life are due to a safety net that I’ve accumulated over time, and knowing that my cost of living is so low that I don’t need that much to survive. And I’d like to keep my means, or sorry, my cost of living… I’d like to keep the amount that it takes to run my life as low as possible in order to take more risks in the future. Yes, definitely.

Scott:
Well, can we hear about your career and the college years and what you’ve been up to in order to get to this point?

Humphrey:
Yeah. So I didn’t know what I wanted to do in college. I went to the University of Washington for two years, and I was kind of depressed up there because it’s so rainy. And so I actually transferred to a school called Loyola Marymount University in Los Angeles when I finished up.
And I finished up at the end of the financial crisis of 2008. I actually graduated in 2009, so jobs were hard to come by at that time. I spent some time in Asia for six months afterwards on a study abroad program just trying to strengthen my Chinese. It’s a very procrastinating thing to do.
And then I came back to America and lived with my dad for a long time. And I just didn’t know what I wanted to do, but I was interested in a few things. I got my degree in finance, so I was interested in finance. I was also a big video gamer growing up, so I also wanted to try a career in gaming.
And my first job out of college was customer support for a Facebook game company. They made Facebook games similar to FarmVille if you remember those. I did customer support there for a year or year and a half. And then I ultimately didn’t like that job because it’s customer support.
I was interviewing with Merrill Lynch at the time, at the same time, and I got a position as a financial advisor. So I was a financial advisor for about a year to a year and a half as well. I got my Series 7 and 66 while I was there. And then after that, I practiced for about six months.

Scott:
Was the financial advisor role… Sometimes those can be very high-commission roles and sometimes those are salaried roles. Which one of those was it for you?

Humphrey:
They gave me a base salary of $49,000 a year, I believe. This was in 2012, 2011/2012, with the expectation of it transitioning slowly over the course of four years into a commission-only salaried role. And I think a large portion of the role was to prospect your network and try to get assets under management for Merrill, and that was basically their program.
It was called the PMD program. In exchange for the Series 7 and 66, the expectation was you’re going to be prospecting clients after you’re fully licensed, and you might work on a team, and you might help some of the more senior advisors.

Scott:
What happens next?

Humphrey:
Yeah. What happens next? A lot of uncertainty. I wasn’t sure what I wanted to do. I definitely wasn’t happy at the financial advisor role. I just realized that a lot of these… not Merrill in particular, but a lot of these big banks and their financial advisory programs, what they do is, in terms of investing, they just put you in standardized products that are approved by the big firms.
And so a lot of these big products are typically some sort of fancier ETF or a mixture of ETFs that are low-risk, predictable for their clients. And a lot of the financial advisory business was managing the relationship.
I think we had one advisor who was very successful who said, “I don’t actually manage money. I manage relationships. I manage expectations and I manage relationships. And people are happy. And that’s who they call. They call me when things are not going well in the market, for example.”
Obviously, I still think financial advisors are good for certain use cases. For example, if you need estate planning, tax planning, certain college fund planning, if you have specific situations, then you might need a financial advisor. That’s what I tell my friends that are looking into one.
However, if you’re just looking for investment returns, I’m sure you guys have heard that active fund managers don’t ever beat the market or most of them don’t beat the market, so you might as well just invest in a low-cost S&P 500 index fund. I still believe in that. And it was reinforced to me that way when I learned about that at the job.

Scott:
I always wanted to be a financial advisor. That was one of the things that I was really… Because I’ve always loved personal finance if you can tell from this podcast here. But I realized pretty quickly into the first year of my career that becoming a financial advisor was doing that kind of stuff.
It’s almost a little disheartening, isn’t it? A lot of people love talking about this, help people build wealth. It’s a shame that such a huge percentage of the industry monetizes with those AUM fees or, you didn’t even mention this, but life insurance products for example, and not the nitty-gritty helping people actually plan their estates and do that kind of work. That is really where I think the real value is added to the clients’ lives.

Humphrey:
Yeah. I definitely agree with you. I think there are definitely some advisors that are doing, I don’t know, God’s work, and they’re actually helping people with their finances. But a large percentage of the industry is just, “Yes, let’s get your assets under management, let’s charge you a fee, and let’s put you in some products. And we’ll have a call once a quarter, and hopefully, that’ll be that.” Yep, so that’s that. And then I guess you wanted to know what I did after that, I suppose?

Scott:
Yes, please.

Humphrey:
Yeah. After that, I did an investment banking internship for six months because I thought it was better finance if you will. I don’t know if that meant anything. But at this point, I was kind of lost in my life, I suppose.
And then I decided I wanted to go back into video games. So it was like 2014, I find a new company that a friend refers me to, it’s called Machine Zone. And I start off there as a quality assurance specialist, but then quickly I get a job helping them with monetization. So I’m about six months into this job, into the quality assurance, and I get a job switch to monetization.
And Machine Zone was a really interesting company. Machine Zone was Y Combinator-backed, and they had just raised a bunch of money because their games were monetizing very heavily. Their flagship game was called Game of War, and their second flagship game was called Mobile Strike. And if you remember those two games, they had Super Bowl commercials back in 2015/2016.
Arnold Schwarzenegger was in one. Kate Hudson, not Kate Hudson, Kate Upton was in another one. Mariah Carey was in one. This was the rage back then.
As a monetization specialist, what I was doing was I was designing in-game packages, in-app purchases packages for people to buy whenever they logged into the game. So whenever you log into the game, you would get an offer thrown at you like, Hey, do you want to buy this package for 50 bucks? These are all the in-game items you get.
You had to manage it a little bit. You want to make sure you’re not putting too many great items in the package so that it’s ruining your in-game economy. And you also have to title it and make a cool piece of art. You want to make it look as beautiful as possible.
And so I did that for two straight years, and that was a pretty grueling job. It was almost like a trading desk because we got real-time stats of how much money was being spent in the video game every single minute. And there were hourly targets and there were daily targets, and there were monthly targets of how much money we needed to make every single month in order to continue our upward growth trajectory.
And this game was pulling in a couple of million dollars a day. This thing was crazy. At one point, this company was valued at $5 or $6 billion in its heyday. And I helped sell these in-ad purchases.
So I got a lot of real-time feedback, real-time data. I learned how to A/B test really well. I learned how to look at this data and make experimental inferences about what was going on. And I would say this period in my life, which was two straight years of almost 24/7 all the time, really taught me a lot about just marketing, psychology, data analytics, A/B testing, everything that you could think of to grow a business, I would say.

Scott:
Awesome. And so what years were you there and then what’d you do next?

Humphrey:
Early 2014 to late 2016. So it would’ve been two years and change maybe. In 2017, I started a business called YourOwnMaps. I wanted to sell posters online. I don’t know why. A friend of mine came to me and said, “Hey, we should sell some posters online.” I’m like, “Okay.” Well, I quit my job and I wanted to start my own business.

Scott:
Okay, perfect. I want to ask about this transition. So you’ve been working for a couple of years. Is this the point in your journey where the frugality that’s an underpinning behind all of this career progression begins to pay off and affords you the opportunity to take a risk on a business?

Humphrey:
Yeah. Yeah, it definitely did. I think I had at least $150,000 saved up. I was living at home too, which was great because I’m not spending any money on rent. I have $150K saved up. And I’m like, “Okay, I can quit my job for a few months. I can think of something.”
I wanted to start a business, and I didn’t know what to start. So, January 2017, a friend of mine comes to me. He had just came from Europe and he was working for Facebook. And he was like, “Hey, I’ve seen this business model in Europe do really well where they sell these custom posters of these maps, and we could do that here in America.” I was like, “Okay, great. Let’s do it.”
And so I didn’t know what I was doing, but I knew that I could do… I’m always a big believer that I can learn how to do anything. And so we spent a few months developing the website and what it will look like.
I spent a couple of months looking for a supplier, so someone to print the actual product and then ship the products to end customers. I guess I’m kind of fast-forwarding a little bit, but it was a tough time of six months of not sure what to do. I spent about $20K on the website initially of the $150K. I still had $130K.
Of course, I was still spending money eating food and seeing my friends and doing entertainment stuff. But because of the frugality, that definitely afforded me that opportunity. And I could have done it for another year or two without making any money at all and been totally fine.
And so that’s what I tell some people who want to do something entrepreneurial on their own. It’s like, you need at least a good nest egg of six months to a year of living expenses for a real shot at these things. Because my own business wasn’t even successful until maybe month nine. And so if you’re thinking… And that’s good, by the way. A lot of these businesses don’t break even until year three.
And so, for me, I was lucky in that we started to make some profit right away and see some success there. I still wasn’t drawing that much money from the business. My first year salary was maybe $35,000, 38,000. And then the next year was 40, 45. It showed me that I could do it, but it showed me that I also needed to think of something different if I wanted to make more than $40,000 or $50,000 if that makes sense.

Scott:
You were mapping out the journey to financial independence.

Mindy:
Oh, Scott, what a terrible pun.

Humphrey:
Yeah.

Scott:
Sorry.

Humphrey:
Good pun.

Scott:
Thank you for the groan. I appreciate it, guys.

Humphrey:
Yeah. So I did this business from 2017 to middle 2019. And at the same time, I’m trying all these other different types of things. I tried to create a budgeting app. I hired someone on Upwork. I’m trying different things. I wrote an E-book on how to email market, and I tried to market that on Twitter. And then I also tried dropshipping, which I failed at. Dropshipping was way harder than actually starting a real business, in my opinion.

Mindy:
Wait, but the guys on the internet say that you just start it and you make all this money. What do you mean? That’s not true?

Humphrey:
I think it’s a really great way for people to get into online E-commerce for a very low price point, but it comes with a lot of risks, and I think it’s more of an art form to do it right correctly. And what’s funny is that if you become really great at dropshipping, you actually just want to create a white-label business or a real E-commerce business.
So it’s like you’re doing all these steps to just get to where I already was at. So for me, I was happy doing just the straight-up E-commerce business. But dropshipping is hard, definitely not easy. And I think it’s hard not because of selling the product. I think it’s hard because of the logistics behind the scenes.
The products are coming from China. If they’re coming from China, it’s like a three-week ship time. And so now you have to deal with customers that are pissed off at you because of the three-week ship time. And then you have to deal with the payment processors that are getting charged back from those customers because the product’s not coming in time.
And then you have quality issues, and you have all these… It’s just not the best model if you want to have a great experience for the customer. But it’s a good model for those entrepreneurs that are trying business for the first time and they don’t have more than like $3,000 to spend.

Scott:
So you tried an E-book, we have a dropshipping business, we have a map business. What else is going on here? And how many of these initiatives go on until you settle on making videos?

Humphrey:
Yeah. I probably had four to five different initiatives from 2017 to 2019 that I tried, some with other friends, some by myself. I also did some consulting on the side just to make an extra income.
I would consult for this one marketing company. It was, at the time, called MarketerHire. And so other E-commerce businesses would hire me to help them with their email marketing or their marketing in general. And all these principles I learned from the video game business, by the way, just marketing and psychology.

Scott:
A/B testing, right? That seems like that’s a huge competency.

Humphrey:
Yeah. And it’s actually not too hard, but then it’s understanding if the data that you have is statistically significant and making hypotheses about the next test and next iteration. So it was about middle 2019 that I was like, okay, maybe I should try making some videos on YouTube.
Because I’d just listened to a Naval Ravikant podcast, and he was all about scaling yourself through either code or media. And I was like, okay, let’s try some YouTube videos. I really believe in what he says there.
So I tried three YouTube videos, they went nowhere. I had 10 views on each one because I sent them to all my 10 friends. I kind of gave up on it, to be honest. I made three. I was like, “Okay, that was a good try. Whatever.” It was just another initiative at the time.
But then I caught myself watching TikTok in 2019, and this was at a time when people my age weren’t watching TikTok. It was mostly teens, I would say. And I would watch it every night before bed. I thought it was pretty funny and I was pretty addicted to it.
And then at some point that fall, it kind of dawned on me like, hey, I should check if anyone’s making personal finance videos on TikTok. And nobody was. There was one video. I searched #PersonalFinance. There was literally one video. And there was one guy making videos about stocks, and they weren’t that good.
So I said, okay, if I can be first to market on here, maybe I can get some traction and get people over to my YouTube channel. And then eventually, I can make YouTube videos. That was my whole goal. And so towards the end of 2019, I decided to have a goal of making 30 straight TikToks in a row, 30 days.
I think on day 11, I had a video that got 100,000 views on day 11, and that got me like 1,500 followers. And I was like, “Wow, that’s cool. That’s way more than I’ve ever gotten on YouTube.” And I think on day 17, I had a video go viral and get 3 million views, and I got 100,000 subscribers, sorry, 100,000 followers on TikTok at the time from that one video.
So by the end of 30 days, I had 120K followers on TikTok. And I was like, all right, well, I’m going to keep going because clearly there’s demand for this type of content. And so by the time the pandemic actually started, I already had 350,000 followers, which was great.
And then I had nothing to do because it was COVID, there was nothing to do. So I was like, oh, I might as well just keep making a video every day because it’s like, dude, I’m already here. There’s nothing else to do. It’s easy to make a video. It gave me some purpose throughout COVID.
At that time, I started to slow down on the maps business because it wasn’t doing that well anymore. And so it just was a slow shift towards video creation. And then at the same time during COVID, I started to make YouTube videos again, and I’ve just been going ever since.

Scott:
They say that nine out of 10 businesses fail, and so your approach is to start 10 businesses.

Humphrey:
I probably tried 10 different initiatives, for sure, throughout my life. And they might not have been great initiatives, but at least a month here and there, a couple of months here and there, etc. Yeah.

Scott:
I mean, if you think about it, it took you three years to find what worked for you with these things. You kept your expenses really low. You applied a skillset and the scientific method to a variety of different businesses. And when you hit one, you went all in, and you love it, clearly, with it, and it’s been super successful.
I think that should be inspiring to folks. If you can actually commit the capital and have the time and space to try these initiatives, you can fail six, seven, eight, nine times over a two or three-year period and hit a winner on that. That’s not unachievable for a lot of folks, I think, listening to this.

Humphrey:
Yeah. I definitely think it takes more than one shot. I have friends that take one shot at something and they give up. But I also think I had an unfair advantage because I was able to live at home. Not many people can live at home for free in the Bay Area. I was saving $2K, $3K a month on rent.
And I was okay living at home. That’s another thing. And some people in their early 30s might not want to live at home because of embarrassment or whatever, and it didn’t bother me. Before the podcast, Mindy asked me if I was married and have kids, and the answer is no because I probably spent four of my prime years living at home and not really dating.

Scott:
Well, let’s get into your processes for making these videos. What was it? You just stick a camera, take a look at it? How did it start and what is it like now?

Humphrey:
Oh, yeah. It’s way different now than when it started. When it started, I’m literally making a video about any topic that comes to mind that I think is remotely financially personal finance-related. And there’s no thought behind the topic. It’s just like, “Hey, that sounds interesting. Let’s make a video about that.”
Or, “Airbnb is IPOing this week. Why don’t we make a video about that?” Or, “The presidential election is here. Why don’t we make a video about that?”
Some of those topics could be good, but I was literally just turning out… There was one video I made that was comparing the difference between Bitcoin and Pokémon cards as an investment, and it was just a bad… That’s such a bad topic, but I thought it was great at the time.
So in the beginning, it was very much like, let’s just make whatever and see what sticks. And I still think that’s a really great method. You’re testing all these different things and seeing what sticks and what doesn’t.
But as I’ve gotten better at YouTube over the years, it’s definitely more methodical in terms of what topics we choose. And topic selection is, I think, one of the most important things on YouTube because it determines your market size. If you make a topic about coconut water from Bali or something like that, the ceiling for that might be 100,000 views.
But if you made a video about the toxicity of carbonated water, I don’t know, I just saw you drinking a bubly, you might be able to get 2 million views on that because it’s a way wider, broader topic. I always think about market size now when I think about making a YouTube video.

Scott:
I have a mini fridge with nothing but cherrybubly in it right next to my office. That’s not a joke or an exaggeration.

Humphrey:
Well, there you go.

Mindy:
If somebody is listening to this episode right now and thinks, “I want to be the next Humphrey Yang,” what is your advice to somebody who wants to start making money online?

Humphrey:
Yeah. So if you want to do YouTube videos, my advice is always make searchable content in the beginning. Have a library of 50 to 100 searchable video topics at the beginning because that builds you a strong base.
You know that certain topics are always going to be searched. For example, what is asset allocation? That is a great video that you can make that’s four to five minutes long, talking about what it exactly is. If you think about it, if you have 50 different topics like that, like what is asset allocation, what is risk, what are some of the index… what things should you look for in index funds? All these searchable-type topics, eventually, every one of those videos is going to start compounding for you with views over time, and you’re going to build a nice base of views on your channel over the course of a year or two.
And then that’s when you can start to play around with the types of topics you can do to try to hit more trendy type of topics and try to capitalize on high viewership. It’s like, imagine you had a channel with 50 of those financial explainers. I’m just talking about finance because that’s what I got.
And then all of a sudden, Silicon Valley Bank crashes, you can make a Silicon Valley Bank video which would’ve gotten you an outsized number of views, and then people would be interested in all your other topics because it’s financially adjacent. And then you can build your brand that way. I think too many people just give up on their YouTube videos.
I was about to give up after video three, but I think Ali Abdaal says this, he’s a productivity YouTuber, he says it takes 50 to 100 videos. And I think even Mr. Beast has said, “Hey, if you’re trying to become a YouTuber, make 100 videos and then talk to me. Don’t talk to me before 100 videos.” So I think it takes a long-term mindset of let’s do this for a really long time and see what happens, and then adjust.

Mindy:
Is this just you doing this or do you have a team? Is there a bunch of people behind you helping you out?

Humphrey:
It’s mostly me and an editor. So my editor has been with me since November 2020, and he actually reached out to me in June of 2020. This was very early on. I had no YouTube presence. I had 500,000 people on TikTok maybe, and he just DMed me cold and said, “Hey, I’d like to edit for you one day.” And I kind of ignored him for a few months, and then I needed one in November.
I edited my first 100 videos myself probably, and then I hired him. And then he’s been working with me since. And he’s actually improved his editing skills so much, and he definitely wants to learn. He’s someone who’s entrepreneurial as well, so we get along really well.
And a huge reason why we have so much success is because of his animations on the channel. If you notice, a lot of our videos are animated quite well. And he’s an editor plus animator, which is hard to find. Usually, you have to find two different people that are editors plus animators. But he taught himself animation throughout the last three years. So, very thankful for him.
So it’s just me and him, and then I have a guy that helps me make thumbnails, and that’s it. And I’m trying to find another editor so that I can come out with more videos next year.

Mindy:
Okay. Well, that leads me to my last question. What is the future of your content and your financial journey? Where are you going next year? What are you focusing on?

Humphrey:
Yeah. I have a lot of financial YouTuber friends. They make a lot of money. And sometimes I feel bad because I don’t make as much as them. And I think they make a lot of money because they’re hyper-focused on their niche. They might sell a product or they might offer a service, or they might offer a course or something like that, and they’re able to capitalize on that. They might have better affiliate links for the certain niche that they’re in.
I still don’t know how I feel about selling a course. I don’t love it. I think a lot of the information that you can get online is free anyway, so what would my value of a course be? Maybe it would be to concisely condense everything so it was just really easy for you and really easily served.
But right now, I don’t think I have a product or a service or a course offering that really fits my channel perfectly that I could offer to my audience. So right now, I’m not creating a side business off of the audience right now, off of my channel.
And so my goal is still to do YouTube in five, 10 years. And so I really want to continue to grow the presence that I have online, continue to grow viewership. And I think sometimes just making videos is all I need to do. I think that all the biggest YouTubers, if you look at Marques Brownlee in the tech space, he’s been doing YouTube videos for 15 years.
He hasn’t really sold a product or a service too hard either. He has a merch line ish, but it’s not like he’s got a flagship product or a flagship business that he runs on the side. His main business is videos. And for 15 years, it has worked. So, clearly, there’s that business model that works. It’s like, let’s just make great videos, and I just want to keep doing that.

Mindy:
That’s fantastic. You need to protect your audience. You’re not selling anything right now, and that’s what your audience loves. You’re giving them great content without just bombarding them with stuff. You’re genuine in your delivery.
And when somebody is trying to sell something and be skeezy, that comes across. It oozes out of every pore that they have. And you’re like, “Nope. Next.” I don’t know if you know this, you’re not the only guy on YouTube. There’s no shortage of guys on YouTube. So they’ll just go find somebody else that they connect with better.
On the other hand, you have an audience, and they watch you because they like you. They want to learn from you. So if you have something that aligns with what they’re looking for, even if it’s all over the internet for free, there is a value for somebody whose voice that they appreciate gathering it all together in one place for them to find this information.
If you do do a course, give them $200,000 worth of information for 20 bucks, not 20 bucks worth of information for $200,000, because there’s no shortage of those guys either.

Humphrey:
Yeah. I think it’s just I haven’t found something that aligns with me perfectly just yet, and I’m definitely searching for something like that. I know it’s part of my longer-term vision. But for now, I don’t feel an immense pressure to do that right now.

Mindy:
Yeah, you don’t have to. How about just a T-shirt with Humphrey Yang’s face?

Humphrey:
I don’t know if anybody’s going to buy that.

Scott:
Humphrey, before we adjourn here, is there a place where people can go find out more about you?

Humphrey:
Yes. Please subscribe to my YouTube channel, it’s Humphrey Yang. And then I also have a newsletter, it’s called Hump Days. It’s on Substack. So we come out with business news twice a week for free, Wednesdays and Fridays. Humpdays.substack.com. That’s perfect. That’s where you can find me.

Mindy:
Humphrey, thank you so much for your time today. This was so much fun. And we will talk to you soon.

Humphrey:
Cool. Thank you, Mindy and Scott, for having me on BiggerPockets.

Mindy:
All right. Scott, that was Humphrey Yang, and that was super fun. I love his story. I felt a kinship with him with the whole growing up frugal and now saving everything you have. Yeah, we both need to work on that a little bit more. What did you think of his story?

Scott:
I thought it was dangerous because I have a clear and obvious bias for how I think is a really good formula for building wealth, and he largely fit right into that bias by spending so little, finding opportunities to increase his income, saving a bunch, and then trying 10 entrepreneurial journeys, which is my dream blueprint for success. If only he’d house hacked as well, but he got to live for free, so I guess that’s part of it. But yeah.

Mindy:
He kind of house hacked.

Scott:
Yeah.

Mindy:
He hacked his housing by not paying anything.

Scott:
Yeah. It does not make a rule, but I just think it’s such a high-probability path for success. And you can swap out the living with the parents with a house hack, for example, and have many of the same opportunities there in many parts of the country, probably not San Francisco where he’s from, but in many parts of the country.

Mindy:
Yes. And he mentioned unfair advantages. I think that everybody has an advantage. I don’t like the phrase “unfair” because everybody has an advantage. Take advantage of your advantages. There’s a lot of people who have advantages. They don’t take advantage of them. They don’t use them at all. They just let them sit. And then it’s just a waste.
So if you have an advantage, use it. Use what you have to further… Scott, you have a big brain. You use that in your day-to-day life. You use that in your job. That’s giving you an advantage over anybody else that was going to be CEO. They didn’t have the same brain that you had. And therefore, they’re not CEO. It’s just what you have. You use the tools in your toolbox to further your career, to further your steps. So yeah, when you have something that you can use, take advantage of it.

Scott:
Well, thank you for the big-brain comment, Mindy. I really appreciate it. I also have incredible admiration for your enormous brain and the ways that you put that to use. And I’ll throw in another one for you, which is your community. You’re an incredible community builder, and you use that advantage in a lot of “unfair” ways to bring happiness, joy, and business into your life, and business opportunities. So, love that in so many ways.
I do want to throw out a question here. What hypothesis, Mindy, are you going to test in 2024?

Mindy:
I am going to test… Wow, Scott, put me on the spot. What are you going to test while I think of one?

Scott:
I am going to test the hypothesis that there are a large number of people who are losing money investing in passive syndications at this point in time because of the market dynamics and unfortunate realities of higher interest rates, and that those folks are going to take this opportunity as a lesson and spend a large amount of time learning how to run the nuts and bolts of analysis on passive investment opportunities like apartment complexes and syndication deals like self-storage, like debt funds, and that there’s an opportunity for BiggerPockets to provide an educational platform that does very rigorous analysis on those types of deals and helps people make really highly informed decisions about what the bet they’re actually making is in those types of things.
So we’re going to call it Passive Pockets, and we’re going to launch it sometime in 2024. That’s my hypothesis.

Mindy:
My hypothesis that I’m going to test throughout the entirety of 2024 is that spending on things that bring me joy or that make my life easier is not going to hurt my overall financial position and will, in fact, make my life better. So I am going to do that. And I have started and stopped and started and stopped. And I’ve got a list of things that I want to accomplish next year, and spending money to get them done is now going to be the way that I go, as opposed to doing it all myself.

Scott:
Those who are listening here, thank you so much for joining us today. We’d love to hear what your hypothesis that you’re going to test for 2024 is. Please share that with us in the Facebook group at facebook.com/groups/BPmoney, and we’ll be looking there.

Mindy:
All right, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
That wraps up this episode of the BiggerPockets Money Podcast. He is Scott Trench, and I am Mindy Jensen, saying toodles Goldendoodles.

Scott:
If you enjoyed today’s episode, please give us a five-star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at YouTube.com/BiggerPocketsMoney.

Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett. Editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.